FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of November, 2003
Commission File Number 1-15224
Energy Company of Minas Gerais
________________________________________________________
(Translation of registrant's name into English)
Avenida Barbacena, 1200
30190-131 Belo Horizonte, Minas Gerais, Brazil
________________________________________________________
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--------- ----------
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
--------- ----------
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
Index
Item Description of Item
---- -------------------
1. Interim financial statements as of and for the nine-month
period ended September 30, 2003, prepared in accordance
with accounting practices adopted in Brazil, in Brazilian
reais (convenience translation into English from the
Portuguese-language version filed with the Brazilian
Comissao Nacional de Valores).
2. Management's discussion and analysis of results of
consolidated operations relating to the interim financial
statements as of and for the nine-month period ended
September 30, 2003, prepared in accordance with accounting
practices adopted in Brazil, in Brazilian reais
(convenience translation into English from the
Portuguese-language version filed with the Brazilian
Comissao Nacional de Valores).
Item 1
Companhia Energetica de Minas Gerais - CEMIG
Interim Financial Statements
Together with Independent Accountant's Report on Special Review
September 30, 2003
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Shareholders and the Board of Directors of
Companhia Energetica de Minas Gerais - CEMIG
Belo Horizonte - MG
-------------------
1. We have performed a special review of the quarterly information,
presented in Brazilian reais, of Companhia Energetica de Minas
Gerais - CEMIG and subsidiaries (Company and Consolidated) as of
September 30, 2003 and for the quarter and the nine month period
then ended, prepared under the responsibility of the Company's
management, in accordance with accounting practices adopted in
Brazil, consisting of the balance sheets, statements of income and
management's discussion and analysis.
2. We conducted our review in accordance with specific standards
established by the Brazilian Institute of Independent Auditors
(IBRACON), together with the Federal Accounting Council, which
consisted principally of: (a) inquiries and discussions with
management responsible for the accounting, financial and operating
areas of the Company and its subsidiaries as to the principal
criteria adopted in the preparation of the quarterly information,
and (b) review of the information and subsequent events that had or
might have had significant effects on the Company's and its
subsidiaries' financial positions and results of operations.
3. Based on our special review, we are not aware of any material
modifications that should be made to the quarterly information
referred to in paragraph 1 above for it to be in conformity with
accounting practices adopted in Brazil and accounting standards
issued by the Brazilian Securities Commission (CVM), specifically
applicable to the preparation of mandatory quarterly financial
information.
4. As mentioned in Notes 5, 7, 8 and 15 to the quarterly information,
as of September 30, 2003, the Company and its subsidiaries have
recorded assets, liabilities, revenues and expenses related to
energy sales, purchases and other transactions occurred on the
Wholesale Energy Market - MAE. Such amounts were recorded based on
calculations prepared and information made available by MAE
regarding transactions through August 31, 2003 and based on Company
and its subsidiaries estimates for transactions in September 2003.
Those amounts are subject to change, depending on the outcome of
claims currently in progress in court, filed by electric energy
companies, concerning the interpretation of the market rules in
force at the time that those transactions occurred.
5. The balance sheets (Company and Consolidated) as of June 30, 2003,
presented for comparative purposes, were reviewed by us and our
special review report, dated July 31, 2003, was issued without
qualification and included comments regarding the matter discussed
in paragraph 4 above. The statements of income (Company and
Consolidated) for the quarter and the nine-month period ended
September 30, 2002, presented for comparative purposes, were
reviewed by us, and our special review report, originally dated
November 29, 2002 and reissued on January 21, 2003, included
comments regarding:
(i) The independent accountants' special review report reissued on
January 21, 2003, originally issued dated November 29, 2002,
regarding the Company's quarterly information as of September
30, 2002, which was revised by the Company due to the recording
of a provision for losses on part of the accounts receivable
from the Government of the State of Minas Gerais and to the
updated information about Company's rights and obligations on
the Wholesale Energy Market - MAE;
(ii) The Company's lack of means to honor the commitment assumed by
its controlling shareholders, through the concession agreements
signed with the granting authority, regarding the corporate
reorganization of its activities resulting in the unbundling of
its generation, transmission and distribution operations into
separate subsidiaries. The Company has submitted an extension
request to ANEEL, which has not yet responded. The Company,
based on the opinion of its internal and external legal
counsel, believes it has strong arguments to defend itself
against possible penalties to be imposed by the granting
authority regarding this matter;
(iii) The possible changes in assets, liabilities, revenues and
expenses related to: (a) procedures regarding reimbursement of
generating companies of costs incurred for energy traded on the
spot market during the Electricity Rationing Plan; and (b)
transactions related to energy sales, purchases and other
transactions occurred on the Wholesale Energy Market - MAE;
(iv) Executive Act No.14, that was issued on December 21, 2001,
converted into Law No. 14,438 on April 26, 2002, that
regulated, among other matters, the recovery of the economic
and financial equilibrium of Brazilian companies in the
electric energy sector, as guaranteed under the concession
agreements and the application of special rate adjustments
approved by the granting authority.
6. This quarterly information has been translated into English for the
convenience of readers outside Brazil.
Belo Horizonte, October 30, 2003
/S/ Deloitte Touche Tohmatsu /S/ Francisco Papellas Filho
DELOITTE TOUCHE TOHMATSU Francisco Papellas Filho
Auditores Independentes Engagement Partner
2
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
SEPTEMBER 30, 2003 AND JUNE 30, 2003
(Expressed in thousands of Brazilian reais - R$)
------------------------------------------------------------------------------------------------------------------------
A S S E T S
----------------
Consolidated Company
--------------------------------------- ------------------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
------------------ ----------------- ----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents 292,820 274,361 211,981 196,809
Accounts receivable 1,001,751 996,981 981,511 977,768
Consumers - Special rate adjustment 289,065 291,829 289,065 291,829
Concessionaires - Energy transmission 29,398 21,511 29,398 21,511
Distributors - MAE Transactions 144,401 140,444 144,401 140,444
Recoverable taxes 89,168 64,471 81,637 56,561
Materials and supplies 24,277 20,700 15,199 14,103
Prepaid expenses - CVA 130,185 47,243 130,185 47,243
Electricity Rationing Plan - Bonus paid
to consumers and adoption costs
incurred 15,140 22,107 15,140 22,107
Receivables from Federal Government -
Revenue losses from low-income
consumers 31,359 86,669 31,359 86,669
Other 114,510 113,523 121,507 118,695
------------------ ----------------- ----------------- -----------------
2,162,074 2,079,839 2,051,282 1,973,739
------------------ ----------------- ----------------- -----------------
NONCURRENT ASSETS:
Receivable from Minas Gerais State
Government 874,145 836,971 874,145 836,971
Consumers - Special rate adjustment 1,136,062 1,115,819 1,136,062 1,115,819
Prepaid expenses - CVA 416,546 449,987 416,546 449,987
Tax credits 443,100 453,491 422,671 433,411
Marketable securities 84,511 74,691 84,511 74,691
Electricity Rationing Plan - Bonus paid
to consumers and adoption costs
incurred 23,449 23,449 23,449 23,449
Distributors - Energy supply 465,972 436,073 465,972 436,073
Recoverable taxes 116,926 118,346 105,294 107,014
Escrow deposits 77,966 67,892 77,966 67,892
Accounts receivable 62,035 49,166 62,035 49,166
Other 72,768 78,531 72,651 78,276
------------------ ----------------- ----------------- -----------------
3,773,480 3,704,416 3,741,302 3,672,749
------------------ ----------------- ----------------- -----------------
PERMANENT ASSETS:
Investments 776,783 736,984 1,391,695 1,342,764
Property, plant and equipment 7,955,305 7,945,665 7,331,847 7,322,253
Deferred charges 23,212 22,957 690 780
------ --- ---
------------------ ----------------- ----------------- -----------------
8,755,300 8,705,606 8,724,232 8,665,797
------------------ ----------------- ----------------- -----------------
Total assets 14,690,854 14,489,861 14,516,917 14,312,285
================== ================= ================= =================
The accompanying condensed notes are an integral part of these financial statements.
1
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
SEPTEMBER 30, 2003 AND JUNE 30, 2003
(Expressed in thousands of Brazilian reais - R$)
-------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Consolidated Company
--------------------------------------- ------------------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
------------------ ----------------- ----------------- -----------------
CURRENT LIABILITIES:
Suppliers 810,487 1,202,346 782,065 1,170,507
Taxes payable 364,595 346,890 354,576 334,081
Loans and financing 981,337 679,571 958,209 658,820
Payroll and related charges 123,916 118,347 122,368 117,189
Dividends and interest on capital 202,954 202,973 202,522 202,541
Employee post-retirement benefits 183,681 244,257 183,681 244,257
Regulatory charges 138,224 182,124 137,888 181,819
Employee profit sharing 34,101 23,087 34,083 23,075
Other 127,660 120,365 126,508 118,797
------------------ ----------------- ----------------- -----------------
2,966,955 3,119,960 2,901,900 3,051,086
------------------ ----------------- ----------------- -----------------
LONG-TERM LIABILITIES:
Loans and financing 1,601,918 1,625,723 1,524,009 1,547,080
Debentures 876,945 867,631 876,945 867,631
Employee post-retirement benefits 1,524,838 1,533,142 1,524,838 1,533,142
Suppliers 345,944 333,974 345,944 333,974
Reserve for contingencies 371,927 357,415 371,927 357,415
Taxes payable 405,884 317,185 405,884 317,185
Other 74,018 90,071 71,311 88,313
------------------ ----------------- ----------------- -----------------
5,201,474 5,125,141 5,120,858 5,044,740
------------------ ----------------- ----------------- -----------------
MINORITY INTEREST 28,266 28,301 - -
SHAREHOLDERS' EQUITY:
Capital 1,621,538 1,621,538 1,621,538 1,621,538
Capital reserves 4,059,345 4,059,345 4,059,345 4,059,345
Income reserves 113 113 113 113
Accumulated earnings 813,163 535,463 813,163 535,463
------------------ ----------------- ----------------- -----------------
6,494,159 6,216,459 6,494,159 6,216,459
------------------ ----------------- ----------------- -----------------
Total liabilities and shareholders'
equity 14,690,854 14,489,861 14,516,917 14,312,285
================== ================= ================= =================
The accompanying condensed notes are an integral part of these financial statements.
2
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002 (Expressed in
thousands of Brazilian reais - R$, except for per share data)
-------------------------------------------------------------------------------
Consolidated Company
------------------------------ ------------------------------
Nine-month periods Nine-month periods
ended September 30, ended September 30,
------------------------------ ------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
OPERATING REVENUES:
Electricity sales 5,267,379 4,431,993 5,223,606 4,402,485
Special rate adjustment - 268,913 - 268,913
Other operating revenues 462,749 304,310 240,744 193,697
---------------------------------------------------------------
5,730,128 5,005,216 5,464,350 4,865,095
-------------- -------------- -------------- --------------
DEDUCTIONS FROM OPERATING REVENUES: (1,673,966) (1,184,545) (1,619,682) (1,172,408)
-------------- -------------- -------------- --------------
Net operating revenues 4,056,162 3,820,671 3,844,668 3,692,687
-------------- ------------------------------- --------------
OPERATING EXPENSES:
Personnel (466,742) (398,328) (455,799) (391,927)
Materials and supplies (62,210) (52,316) (61,232) (50,873)
Outside services (221,944) (179,556) (213,634) (173,978)
Charges for use of water resources (48,143) (34,200) (47,556) (33,502)
Electricity purchased for resale (1,036,669) (1,455,041) (1,036,669) (1,455,041)
Use of basic transmission network (247,720) (219,953) (247,720) (219,953)
Depreciation and amortization (421,766) (408,388) (391,249) (387,376)
Employee post-retirement benefits (35,630) (162,748) (35,630) (162,748)
Operating provisions (133,912) (28,032) (132,209) (28,032)
Fuel usage quota (CCC) (219,900) (252,373) (219,900) (252,373)
Gas purchased for resale (126,148) (75,568) - -
Employee profit sharing (34,465) (21,903) (34,443) (21,866)
Energy development account (77,763) - (77,763) -
Other expenses (107,100) (118,465) (96,472) (111,747)
-------------- -------------- -------------- --------------
(3,240,112) (3,406,871) (3,050,276) (3,289,416)
-------------- -------------- -------------- --------------
Income from operations before equity in
subsidiaries and financial income (expenses) 816,050 413,800 794,392 403,271
-------------- -------------- -------------- --------------
EQUITY IN SUBSIDIARIES - - 27,949 (15,778)
-------------- -------------- -------------- --------------
FINANCIAL INCOME (EXPENSES)
Financial income 925,508 759,506 893,441 751,344
Financial expenses (424,807) (1,516,352) (412,804) (1,457,734)
-------------- -------------- -------------- --------------
500,701 (756,846) 480,637 (706,390)
-------------- -------------- -------------- --------------
Income (loss) from operations 1,316,751 (343,046) 1,302,978 (318,897)
NON-OPERATING EXPENSES, NET
Extraordinary losses - (1,045,325) - (1,045,325)
Other expenses, net (24,470) (19,541) (24,447) (19,541)
-------------- -------------- -------------- --------------
(24,470) (1,064,866) (24,447) (1,064,287)
-------------- -------------- -------------- --------------
Income (loss) before taxes on income 1,292,281 (1,407,912) 1,278,531 (1,383,184)
Income and social contribution taxes -
(expense) benefit (480,128) 126,809 (465,368) 112,279
------------------------------ ------------------------------
Income (loss) before reversal of interest on
capital and minority interest 812,153 (1,281,103) 813,163 (1,270,905)
REVERSAL OF INTEREST ON CAPITAL - 120,000 - 120,000
MINORITY INTEREST 1,010 10,198 - -
---------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD 813,163 (1,150,905) 813,163 (1,150,905)
============== ============== ============== ==============
NUMBER OF THOUSANDS OF SHARES OUTSTANDING 162,084,691 162,084,691 162,084,691 162,084,691
============== ============== ============== ==============
EARNINGS (LOSS) PER THOUSAND SHARES - R$ 0.00502 (0.00710) 0.00502 (0.00710)
============== ============== ============== ==============
The accompanying condensed notes are an integral part of these financial statements.
3
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2003 AND 2002
(Expressed in thousands of Brazilian reais - R$, except for per share data)
-------------------------------------------------------------------------------
Consolidated Company
-------------------------------- -------------------------------
Quarter Quarter
ended September 30, ended September 30,
-------------------------------- -------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- ---------------
OPERATING REVENUES:
Electricity sales 1,923,945 1,839,169 1,908,833 1,829,503
Special rate adjustment - 7,488 - 7,488
Other operating revenues 181,297 121,306 90,485 76,492
-------------- -------------- -------------- ---------------
2,105,242 1,967,963 1,999,318 1,913,483
DEDUCTIONS FROM OPERATING REVENUES: (592,595) (428,642) (571,437) (424,316)
-------------- -------------- -------------- ---------------
Net operating revenues 1,512,647 1,539,321 1,427,881 1,489,167
-------------- -------------- -------------- ---------------
OPERATING EXPENSES:
Personnel (150,418) (133,146) (146,591) (130,238)
Materials and supplies (20,664) (18,153) (20,328) (17,399)
Outside services (82,832) (67,820) (78,869) (66,284)
Charges for use of water resources (21,466) (12,024) (21,292) (11,871)
Electricity purchased for resale (356,331) (792,804) (356,331) (792,804)
Use of basic transmission network (90,919) (77,745) (90,919) (77,745)
Depreciation and amortization (140,767) (137,545) (128,993) (129,647)
Employee post-retirement benefits (11,877) (54,249) (11,877) (54,249)
Operating provisions (53,699) (19,613) (53,454) (19,613)
Fuel usage quota (CCC) (62,410) (92,369) (62,410) (92,369)
Gas purchased for resale (49,402) (30,509) - -
Employee profit sharing (11,299) (11,249) (11,293) (11,212)
Energy development account (40,455) - (40,455) -
Other expenses (34,151) (43,206) (30,341) (39,928)
-------------- -------------- -------------- ---------------
(1,126,690) (1,490,432) (1,053,153) (1,443,359)
-------------- -------------- -------------- ---------------
Income from operations before equity in
subsidiaries and financial income (expenses) 385,957 48,889 374,728 45,808
-------------- -------------- -------------- ---------------
EQUITY IN SUBSIDIARIES - - 12,057 (15,498)
-------------- -------------- -------------- ---------------
FINANCIAL INCOME (EXPENSES)
Financial income 241,229 379,204 231,000 376,185
Financial expenses (171,643) (829,220) (167,988) (797,910)
-------------- -------------- -------------- ---------------
69,586 (450,016) 63,012 (421,725)
-------------- -------------- -------------- ---------------
Income (loss) from operations 455,543 (401,127) 449,797 (391,415)
NON-OPERATING EXPENSES, NET (11,777) (5,694) (11,752) (5,115)
-------------- -------------- -------------- ---------------
Income (loss) before taxes on income 443,766 (406,821) 438,045 (396,530)
Income and social contribution taxes (166,363) 149,169 (160,345) 140,421
-------------- -------------- -------------- ---------------
Income (loss) before minority interest 277,403 (257,652) 277,700 (256,109)
MINORITY INTEREST 297 1,543 - -
-------------- -------------- -------------- ---------------
NET INCOME (LOSS) FOR THE PERIOD 277,700 (256,109) 277,700 (256,109)
============== ============== ============== ===============
NUMBER OF THOUSANDS OF SHARES OUTSTANDING 162,084,691 162,084,691 162,084,691 162,084,691
============== ============== ============== ===============
EARNINGS (LOSS) PER
THOUSAND SHARES - R$ 0.00171 (0.00158) 0.00171 (0.00158)
============== ============== ============== ===============
The accompanying condensed notes are an integral part of these financial statements.
4
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
(Amounts expressed in thousands of Brazilian reais - R$, unless otherwise
indicated)
-------------------------------------------------------------------------------
1) THE COMPANY AND ITS OPERATIONS
Companhia Energetica de Minas Gerais - CEMIG ("CEMIG" or the "Company"), a
company organized under the laws of the Federative Republic of Brazil, is an
electric power concessionaire and public utility, controlled by the Government
of the State of Minas Gerais, Brazil (the "State Government"). Its principal
activities are the construction and operation of systems used in the
generation, transmission, distribution and sale of electric energy, as well as
in certain related business activities.
The Company has equity interests in the following operating companies:
o Sa Carvalho S.A. ("Sa Carvalho") (100.00% interest) - Its principal
activities are the production and sale of electric energy from the
Sa Carvalho hydroelectric power plant, as an electric energy public
service concessionaire;
o Usina Termica Ipatinga S.A. ("Ipatinga") (100.00% interest) - Its
principal activities are the production and sale of electric energy,
as an independent power producer, at the Ipatinga thermoelectric
power plant located at the facilities of Usinas Siderurgicas de
Minas Gerais - USIMINAS;
o Companhia de Gas de Minas Gerais - GASMIG ("GASMIG") (95.19%
interest) - Its principal activities are the acquisition,
transportation and distribution of natural gas and related products.
GASMIG was granted a concession by the State Government to
distribute gas in the State of Minas Gerais. GASMIG's bylaws also
permit the performance of activities related to the exploration,
production and storage of natural gas. These activities, however,
are not currently being performed;
o Empresa de Infovias S.A. ("Infovias") (99.92% interest) - Its
principal activities are rendering telecommunications services and
developing activities related thereto, through multiservice networks
using optical fiber cable, coaxial cable and other electronic
equipment. Infovias owns 64.91% of the capital stock of Way TV Belo
Horizonte S.A., a cable TV and internet services provider in certain
cities of the State of Minas Gerais;
o Efficientia S.A. - ("Efficientia") (100.00% interest) - Its
principal activities are rendering efficiency, optimization and
energy solutions services, as well as providing operation and
maintenance services, to energy supply facilities. Efficientia
initiated operations in the first quarter of 2003; and
o Horizontes Energia S.A. (100.00% interest) - Its principal
activities are the production and sale of electric energy, as an
independent power producer, at the Machado Mineiro and Salto do
Paraopeba hydroelectric power plants, located in the State of Minas
Gerais, and the Salto Voltao and Salto do Passo Velho hydroelectric
power plants, located in the State of Santa Catarina. Horizontes
Energia S.A. initiated operations in the third quarter of 2003.
The Company has a 100.00% interest in each of the following pre-operating
stage companies:
o Cemig PCH S.A., Cemig Capim Branco Energia S.A. and UTE Barreiro
S.A. - Their principal activities are expected to be the production
and sale of electric energy, as independent power producers.
o Cemig Trading S.A. - Its principal activities will be related energy
trading.
5
Additionally, CEMIG has a minority interest of 48.50% in Central Termeletrica
de Cogeracao S.A. and in Central Hidreletrica Pai Joaquim S.A., each of which
is in the pre-operating stage.
2) PRESENTATION OF THE FINANCIAL STATEMENTS
The accounting practices, methods and criteria used by the Company in the
preparation of these quarterly financial statements are consistent with those
applied in the financial statements as of and for the year ended December 31,
2002, including consolidation criteria.
The financial statements of companies mentioned in Note 1 were consolidated,
except for the Financial Statements of Central Termeletrica de Cogeracao S.A.
and Central Hidreletrica Pai Joaquim S.A..
The financial statements of controlled companies used to calculate equity and
consolidation are dated September 30, 2003, except those with respect to
GASMIG and Infovias, which are dated August 31, 2003.
3) CASH AND CASH EQUIVALENTS
The composition of the balance is as follows:
Consolidated Company
--------------------------- -----------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
------------- ----------- -------------- -------------
Banks 99,321 136,888 95,107 135,000
Short term investments 193,499 137,473 116,874 61,809
------------- ----------- -------------- -------------
292,820 274,361 211,981 196,809
============= =========== ============== =============
The majority of the short-term investments of CEMIG and its subsidiaries are
invested in Bank Deposit Certificates indexed basically to the CDI (Interbank
Certificate of Deposit rate) variation.
4) ACCOUNTS RECEIVABLE
Consolidated
--------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - accounts - September 30, June 30,
Consumer Class Current up to 90 days over 90 days 2003 2003
------------------------------------------------ -------- ------------- ------------ -------------- ----------
Residential 230,583 143,679 21,761 396,023 383,061
Industrial 189,979 57,489 91,001 338,469 332,128
Commercial 102,659 50,953 17,577 171,189 163,475
Rural 33,395 14,377 5,161 52,933 46,471
Public authorities 15,166 25,331 18,403 58,900 49,045
Public lighting 12,431 29,366 35,777 77,574 77,616
Public services 14,967 4,094 - 19,061 17,431
-------- ------------- ------------ -------------- ----------
Subtotal - Consumers 599,180 325,289 189,680 1,114,149 1,069,227
Supply to other concessionaries 4,122 - - 4,122 10,009
Allowance for doubtful accounts - - (116,520) (116,520) (82,255)
-------- ------------- ------------ -------------- ----------
603,302 325,289 73,160 1,001,751 996,981
======== ============= ============ ============== ==========
6
Company
--------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - accounts - September 30, June 30,
Consumer Class Current up to 90 days over 90 days 2003 2003
------------------------------------------------ -------- ------------- ------------ -------------- --------
Residential 230,583 143,679 21,761 396,023 383,061
Industrial 182,790 57,489 88,338 328,617 323,244
Commercial 89,608 50,953 17,388 157,949 150,730
Rural 33,395 14,377 5,161 52,933 46,471
Public authorities 15,166 25,331 18,403 58,900 49,045
Public lighting 12,431 29,366 35,777 77,574 77,616
Public services 14,967 4,094 - 19,061 17,431
-------- ------------- ------------ -------------- --------
Subtotal - Consumers 578,940 325,289 186,828 1,091,057 1,047,598
Supply to other concessionaries 4,122 - - 4,122 10,009
Allowance for doubtful accounts - - (113,668) (113,668) (79,839)
-------- ------------- ------------ -------------- --------
583,062 325,289 73,160 981,511 977,768
======== ============= ============ ============== ========
The Company has overdue accounts receivable from Companhia de Saneamento de
Minas Gerais - COPASA ("COPASA"), a State Government controlled company, in
the total amount of R$62,035, which are recorded as noncurrent assets
according to the Company's expected realization. Company management is
negotiating the collection of the aforementioned past due amount and does not
expect any loss on its realization.
5) CONSUMERS - SPECIAL RATE ADJUSTMENT
In December 2001, the Federal Government, through the Camara de Gestao da
Crise de Energia Eletrica (the Federal Government's electric energy crisis
committee or the "Energy Crisis Committee"), and the electricity distribution
and generation concessionaires entered into an agreement entitled Acordo Geral
do Setor Eletrico ("General Agreement of the Electricity Sector"). This
agreement was entered into to ensure the economic and financial equilibrium of
the concession contracts and to reimburse concessionaires for lost revenues
related to the period when the Electricity Rationing Plan was in force,
through a special rate adjustment.
Law No. 10,438, of April 26, 2002, and the Energy Crisis Committee's
Resolution No. 91, of December 21, 2001, established a special rate adjustment
applicable as of December 27, 2001. The rate increases were set forth in the
Energy Crisis Committee's Resolution No. 130, of April 30, 2002, as follows:
|_| an increase of 2.90% for rural and residential consumers (excluding
low-income consumers), street lighting and high-tension industrial
consumers whose costs related to electric energy represent at least
18.00% of average production costs and meet certain criteria, related to
load and demand energy factors which were determined in the Resolution.
|_| an increase of 7.90% for all other consumers.
The special rate adjustment mentioned above is being applied to reimburse
concessionaires for the following items:
a. Billing losses in the period from June 1, 2001 to February 28, 2002,
representing the difference between the Company's estimated revenue,
assuming that the Electricity Rationing Plan had not been
implemented, and the actual revenue earned during the rationing
period, as established by ANEEL (National Energy Authority). The
computation does not include overdue payment losses which the
Company does not expect to be material.
b. Variation in Parcel "A" Items (uncontrollable costs as established
by the concession contracts) related to the period from January 1,
2001 to October 25, 2001. The amount to be reimbursed is equal to
the difference (positive or negative) between the Parcel "A" costs
effectively paid and the estimated Parcel "A" costs used for
purposes of computing the most recent annual rate adjustment.
7
c. Amounts to be paid to generators for energy purchased on the MAE,
from June 1, 2001 to February 28, 2002, at a price exceeding
R$49.26/MWh. This asset includes the related taxes and charges on
revenues; however, such taxes and charges are not required to be
transferred to the generators. Accordingly, taxes and charges are
excluded before transferring these amounts to generators. These
amounts may change, depending on the litigation currently in
progress, filed by market agents, including the Company, related to
the interpretation of the market rules in force.
Under ANEEL Resolution No. 484 as of August 29, 2002, the special rate
adjustment will be in force for a maximum period of 82 months, January 2002 to
October 2008. However, management has determined that the special rate
adjustment would not be sufficient to recover CEMIG's rationing losses. This
determination was based on certain assumptions, the most relevant of which
relate to rate adjustments, inflationary rates, SELIC (Brazilian Central Bank
overnight interest rate) and CEMIG's growth in the energy market. Accordingly,
the Company recorded a provision for losses on the realization of the special
rate adjustment.
Considering that the assumptions used in management's determination may change
throughout the recovery period, management periodically reviews these
projections, and consequently, the recorded provision for losses mentioned in
the prior paragraph.
Recovery of credits through the special rate adjustment, under ANEEL
Resolution No. 89 of February 25, 2003, is being made as follows: (i) credits
mentioned in item "a" have been in the process of being recovered since
January 2002; (ii) credits mentioned in items "a" and "c" have been in the
process of being recovered simultaneously since January 2003, in the
proportion of 69.22% and 30.78%, respectively; and (iii) credits mentioned in
item "b" will be the last to be recovered.
The amounts which will be realized through the special rate adjustment,
described in items "a" and "b" above are being restated based on SELIC until
their actual recovery.
According to ANEEL Resolution No. 36, dated January 29, 2003, 48.8% of the
credits described in item "c" above are being monetarily restated based on
SELIC since January 1, 2003 and 33.2% since July 3, 2003, the date of the MAE
settlement (after the conclusion of the audit work). The remaining 18% of the
credits, which corresponds to CEMIG's liabilities on MAE (Note 8), which were
not settled due to an injunction granted to CEMIG, will be restated after the
definition of MAE methodology, as determined pursuant to the injunction, is
applied to calculate CEMIG's rights and obligations, as mentioned in Note 8,
item "b".
Pursuant Resolutions No. 480 to 482, dated August 29, 2002, ANEEL approved the
amounts of billing losses and recovery of variations of the Parcel "A" items.
Despite ANEEL Resolution No. 483, dated August 29, 2002, which approved the
amounts to be paid to generators for the energy purchased on the MAE during
the rationing period, CEMIG recorded such transactions based on information
provided by the MAE in October 2002, which are more current.
ICMS (State VAT) on the special rate adjustment, related to future billings,
which is estimated at R$356,282 (R$351,912 as of June 30, 2003), only becomes
an obligation once the customers are billed. However, because the Company's
only responsibility is to transfer this tax from consumers to the State tax
authorities, the Company did not record this obligation in advance.
8
The amounts to be recovered through the special rate adjustments mentioned in
items "a", "c" and "b", recorded in assets, are as follows:
Company and Consolidated
------------------------------------------------------------
September 30, 2003 June 30, 2003
------------------------------------------- ---------------
SELIC
Principal restatement Total Total
------------- ------------- ---------- ---------------
Billing losses during the Electricity Rationing
Period 876,847 80,018 1,156,865 1,112,485
Amounts collected (360,415) - (360,415) (310,464)
------------- ------------- ---------- ---------------
516,432 280,018 796,450 802,021
Recovery of spot market amounts by generators 456,177 55,830 512,007 475,908
Amounts collected (54,854) - (54,854) (32,645)
------------- ------------- ---------- ---------------
401,323 55,830 457,153 443,263
Recovery of uncontrollable cost variations
relating to Parcel A (item "c") 245,299 136,018 381,317 360,957
------------- ------------- ---------- ---------------
1,163,054 471,866 1,634,920 1,606,241
Provision for losses on the realization of the
special rate adjustment (177,627) (32,166) (209,793) (198,593)
------------- ------------- ---------- ---------------
985,427 439,700 1,425,127 1,407,648
============= ============= ========== ===============
Current 289,065 291,829
Noncurrent 1,136,062 1,115,819
========== ===============
The proceeds of special rate adjustments to be paid to generators, as
described in item "c", recorded in liabilities, under suppliers, are as
follows:
Company and Consolidated
------------------------------------------------------------
September 30, 2003 June 30, 2003
------------------------------------------- ---------------
SELIC
Principal restatement Total Total
------------- ------------- ---------- ---------------
Amounts to be paid to generators 418,269 51,217 469,486 436,369
( - ) Transference made (42,739) - (42,739) (22,750)
------------- ------------- ---------- ---------------
370,085 51,217 426,747 413,619
============= ============= ========== ===============
Short-term liabilities 80,803 79,645
Long-term liabilities 345,944 333,974
========== ===============
9
6) RECOVERABLE TAXES
Consolidated Company
--------------------------- ---------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
--------------- ----------- -------------- ------------
Current Assets
State VAT - ICMS 37,178 28,061 33,153 23,268
Income and social contribution tax 43,666 26,931 40,373 24,031
Other 8,324 9,479 8,111 9,262
--------------- ----------- -------------- ------------
89,168 64,471 81,637 56,561
=============== =========== ============== ============
Noncurrent Assets
State VAT - ICMS 98,083 99,503 86,451 88,171
State VAT - ICMS - Under discussion with Minas
Gerais State Government 18,843 18,843 18,843 18,843
--------------- ----------- -------------- ------------
116,926 118,346 105,294 107,014
=============== =========== ============== ============
Income and social contribution tax credits are primarily related to amounts
arising from the tax returns of prior years, which will be offset in 2003.
Recoverable State VAT credits of the Company and its subsidiaries will be
offset against State VAT liabilities.
Most of the balance recorded as noncurrent assets is subject to a 48-month
offset period, as established by Supplementary Federal Law No. 102/00. The
Company is in a legal dispute with the Minas Gerais State Government in order
to offset State VAT credits in the amount of R$18,843.
7) PREPAID EXPENSES - CVA
The balance of the recoverable variation account of Parcel "A" items - CVA,
refers to the difference, beginning October 26, 2001, between the estimated
Parcel "A" costs of the Company, used in defining rate adjustments, and
payments regarding Parcel "A" items actually made. The variations would be
recovered in subsequent annual rate adjustments.
The Federal Government, through Executive Act No. 116, postponed for a 12
month period the compensation of the "CVA" costs incurred during the period
from March 10, 2002 through March 9, 2003, which would have been offset in the
rate increase in force since April 8, 2003.
The CVA balance, for which compensation was postponed, plus the CVA balance to
be calculated for the next 12 month period, beginning March 10, 2003, will be
reimbursed though an increase in electric rates for a period of 24 months,
beginning on April 8, 2004.
The aforementioned Executive Act included in the CVA the variations between
the estimated costs used in defining rate adjustments related to the Energy
development account and actual payments from February 10, 2003.
Consolidated and Company
--------------------------------------------------------------------
Total Total
SELIC September 30, June 30,
Principal Restatement 2003 2003
----------------- ---------------- --------------- --------------
System service charges - ESS 177,609 14,435 192,044 174,641
Itaipu Binacional eletricity purchase tariff 224,192 64,908 289,100 303,147
Itaipu Binacional eletricity transport tariff 6,745 733 7,478 3,733
Fuel usage quota - CCC (73,964) (22,404) (96,368) (104,934)
Tariff for use of basic transmission network 92,557 12,216 104,773 71,398
Energy development account 43,601 1,918 45,519 45,283
Charges for use of water resources 3,577 608 4,185 3,962
----------------- ---------------- --------------- --------------
474,317 72,414 546,731 497,230
----------------- ---------------- --------------- --------------
Current 130,185 47,243
Noncurrent 416,546 449,987
=============== ==============
10
The above-mentioned amounts are restated based on the SELIC rate from the
payment date to effective recovery through annual rate adjustments.
The amounts to be compensated, which are recorded in current assets, refer to
variations of uncontrollable costs that will be offset based on the annual
rate adjustment on April 8, 2004, according to Management's estimates.
The System service charges - ESS were recorded based on information provided
by the MAE.
8) DISTRIBUTORS - MAE TRANSACTIONS
a) Obligations and rights from the MAE transactions
As established by the General Agreement of the Electricity Sector, the
difference between the amounts paid by generators and distributors related to
the MAE transactions during the period in which the Electricity Rationing Plan
was in force and the amount of R$49.26/MWh will be reimbursed through the
special rate adjustment.
According to ANEEL Resolution No. 36, dated January 29, 2003, distribution
concessionaires should collect and transfer, on a monthly basis, the special
rate adjustment amounts to generators and distributors, including CEMIG, that
have amounts receivable, since March 2003.
Of the special rate adjustment credits to be transferred from other
distribution concessionaires to CEMIG corresponding to approximately R$54,987,
from March 2003 to September 2003, only R$18,534 were received in the period.
Some distribution concessionaires are not transferring the entire amounts of
the special rate adjustments due to CEMIG because they believe, based on their
interpretation of Article 9 of the ANEEL Resolution No. 36 and ANEEL Technical
Note No. 004/2003, that CEMIG is challenging the General Agreement of the
Electricity Sector because it is contesting the methodology applied to
calculate CEMIG's obligations resulting from the MAE transactions (mentioned
in Item "b" of this Note). For this reason, such distribution concessionaires
are prevented from transferring such amounts owed to CEMIG.
CEMIG, however, does not believe that the injunction granted in December 2002,
contesting the methodology applied by the MAE to calculate CEMIG's rights and
obligations, represents a challenge of the General Agreement of the
Electricity Sector. Therefore, the Company is contesting the restrictions
included in ANEEL Resolution No. 36 and ANEEL Technical Note No.004/2003, to
eliminate any sanction or restriction on CEMIG's ability to receive amounts
owed.
The amounts to be received from distribution concessionaires are recorded in
Current and Noncurrent Assets, under Distributors - MAE Transactions.
Approximately 48.8% of CEMIG's rights and obligations with the MAE are being
monetarily restated based on the SELIC variation, as of January 1, 2003 and
33.2% as of July 3, 2003, the date of the MAE settlement. The remaining 18%,
which corresponds to the remaining obligations to be paid, will be restated
after the definition of the MAE methodology, as determined pursuant to the
injunction, is applied to calculate CEMIG's rights and obligations, as
mentioned in this Note, Item "b".
11
CEMIG's rights and obligations related to MAE transactions are as follows:
September June 30,
30, 2003 2003
----------- ----------
ASSETS
Current
Distributors - MAE Transactions 144,401 140,444
Noncurrent
Distributors - MAE Transactions 465,972 436,073
----------- ----------
610,373 576,517
=========== ==========
LIABILITIES
Current
Suppliers 142,560 532,072
----------- ----------
142,560 532,072
=========== ==========
The outcome of lawsuits currently in progress, filed by market agents, related
to the interpretation of the market rules in effect, may change the amounts
recorded by CEMIG related to the MAE transactions.
b) Financial settlement of the MAE transactions
On February 18, 2003, CEMIG settled part of its outstanding obligations
relating to the MAE transactions, in the amount of R$335,482, using funds
provided by the BNDES.
The additional portion, in the amount of R$372,545, was settled on July 3,
2003. Part of the payment was covered by a specific loan provided by the BNDES
in July 2003, in the amount of R$176,483.
The financing provided by the BNDES is guaranteed by 3.27% and 1.36% of the
monthly electricity sales to final customers and will be paid in monthly
installments, until February and August 2008, respectively.
The amounts paid to the MAE were calculated according to an injunction granted
to CEMIG, on December 25, 2002, determining that CEMIG should be considered as
both a distributor and generator for purposes of recording the MAE
transactions. This decision went against ANEEL Resolution No. 447, of August
23, 2002, which determined that CEMIG should be considered as a distribution
concessionaire only.
The amounts provided by the MAE, in accordance with the injunction,
represented a decrease of approximately R$142,560 in CEMIG's net liabilities.
However, because the methodology to be used to calculate CEMIG's rights and
obligations is still pending legal discussion, the Company opted to keep the
amounts recorded according to ANEEL Resolution No. 447. The difference between
the amounts paid and provisioned is recorded under Current liabilities, as
Suppliers.
9) RECEIVABLE FROM MINAS GERAIS STATE GOVERNMENT
The remaining balance of the CRC Account (Recoverable Rate Deficit) was
transferred to the State Government in 1995, through the CRC Credit Assignment
Contract, pursuant to Law No. 8,724/93. This balance is payable monthly, over
17 years beginning June 1, 1998, accrues annual interest of 6% and is subject
to restatement based on the IGP-DI (General Price Index).
12
In 2002, CEMIG entered into the following amendments with the Minas Gerais
State Government:
(a) Second Amendment of the CRC Credit Assignment Contract, signed on October
14, 2002
This Amendment refers to 149 installments, maturing from January 1, 2003 to
May 1, 2015, in the total amount of R$1,466,513, as of September 30, 2003.
These installments are subject to annual interest of 6% and are restated based
on the IGP-DI.
Due to the non-inclusion in the Second Amendment of effective guarantees that
would assure the realization of the aforementioned credit, CEMIG recorded an
allowance for losses in 2002 that represents the total amount referred to in
the Second Amendment.
Due to the full allowance recorded on April 1 2002, the financial income
related to monetary variation and interest on the Second Amendment, from
January to September 2003 and April to September 2002, in the amount of
R$145,245 and R$ 115,657, respectively, did not impact the statement of income
for 2003 and 2002, considering that a provision for loss was recorded in the
same amount. However, in compliance with Brazilian tax legislation, CEMIG has
recorded the federal taxes payable on the mentioned financial income.
The installments under the Second Amendment, due from January 1 to October 1,
2003, totaling R$140,700, including monetary restatement, interest and late
fees were not paid. Company management is negotiating the collection of the
aforementioned past due amount with the State Government, under the conditions
established by the contract.
(b) Third Amendment of the CRC Credit Assignment Contract, signed on October
24, 2002
CEMIG and the State Government signed the Third Amendment in order to
reschedule the payment of the installments originally due from April 1, 1999
to December 1, 1999 and from March 1, 2000 to December 1, 2002. These
installments, totaling R$874,145, including interest and late fees, as of
September 30, 2003, were renegotiated with an annual interest rate of 12.00%
per year and monetary restatement based on the IGP-DI. The installments will
be paid in 149 monthly payments from January 2003 to May 2015. The Third
Amendment also established a guarantee which now allows the Company to retain
dividends and interest on capital to be paid to the State Government, as a
Company shareholder.
The installments of the Third Amendment, due from January 1 to October 1,
2003, totaling R$108,652, including monetary variation, interest and late
fees, were not paid. Company management is negotiating the collection of the
aforementioned past due amount with the Minas Gerais State Government, under
the conditions established by the contract.
The projection of the Company's future operations indicates that the dividends
attributable to the State Government will be sufficient, in the long-term, to
assure the full realization of the credit related to the Third Amendment.
The Company has recorded under Current Liabilities, interest on capital,
related to 2002, to be paid to the State Government in the amount of R$50,418
by December 2003. Part of this liability, in the amount of R$27,918 should be
used to settle the CRC overdue credits.
Management will monitor future events which may impact the Company's dividend
payment projections, in order to conclude if the above-mentioned guarantee is
still effective or if an additional allowance under the Third Amendment is
necessary.
13
10) INCOME AND SOCIAL CONTRIBUTION TAXES
(a) Tax credits
The Company and its subsidiaries have income tax credits recorded as
noncurrent assets, at a 25% rate and social contribution tax credits recorded
at a 9% rate. The composition of the balances is as follows:
Consolidated Company
-------------------------------- -----------------------------
September June 30, September June 30,
30, 2003 2003 30, 2003 2003
-------------- -------------- -------------- -------------
Tax credits on:
Tax loss carryforwards 154,434 181,206 135,028 162,306
Employee post-retirement benefits 50,789 56,723 50,789 56,723
Reserve for contingencies 77,400 75,372 77,400 75,372
Provision for losses on the realization of
the special rate adjustment 71,330 67,521 71,330 67,521
Provision for voluntary termination program
- PDV 9,214 8,611 9,214 8,611
Allowance for doubtful accounts 39,195 27,967 38,647 27,183
Provision for PASEP/COFINS - Special Rate
Adjustment 26,544 26,068 26,544 26,068
Other 14,194 10,023 13,719 9,627
-------------- -------------- -------------- -------------
443,100 453,491 422,671 433,411
============== ============== ============== =============
CEMIG's Board of Directors approved, on March 27, 2003, the analysis made by
CEMIG's Financial and Investor Relations Office on the projected future
results of operations, discounted to present value. According to such
analysis, the Company may be able to realize the tax credits set forth above
over a maximum period of ten years, in compliance with CVM Resolution No. 371,
published on June 27, 2002. CEMIG's Fiscal Council, on March 27, 2003,
received such study for consideration.
In accordance with CEMIG's estimates, future taxable income is expected to
permit realization of the tax credits, recorded as of September 30, 2003, as
follows:
Consolidated Company
-------------- --------------
2003 63,484 63,484
2004 125,747 124,719
2005 41,143 38,823
2006 34,706 31,020
2007 36,781 32,813
2008 to 2010 126,066 116,639
2011 to September, 2013 15,173 15,173
-------------- --------------
443,100 422,671
============== ==============
As of September 30, 2003, CEMIG has tax credits not recognized in its
financial statements, in the amount of R$13,041 (R$15,084 as of June 30,
2003), resulting from Management's estimates that certain obligations, due to
their nature, will be realized over ten years.
Infovias has tax credits not recognized in its financial statements, in the
amount of R$6,516 as of August 31, 2003 (R$5,814 as of May 31, 2003),
resulting from Management's estimates of future taxable income approved by the
Company's Board of Directors.
14
(b) Reconciliation of income tax and social contribution tax expenses
The reconciliation between the nominal expense/benefit of income tax (25%
rate) and social contribution tax (9% rate) and the expense/benefit presented
in the statement of income is as follows:
Consolidated Company
---------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
---------------------------- -------------------------
2003 2002 2003 2002
-------------- ------------ ------------ -----------
Income (loss) before taxes on income 1,292,281 (1,407,912) 1,278,531 (1,383,184)
Income and social contribution tax (expenses) benefits - nominal (439,376) 478,690 (434,701) 470,283
Tax effects on:
Interest on capital - 40,800 - 40,800
Allowance for extraordinary losses on receivable from State
Government - (355,411) - (355,411)
Allowance for losses on monetary restatement of receivables
from State Government (49,383) (39,323) (49,383) (39,323)
Reversal of social contribution tax on additional monetary
restatement (4,823) (6,950) (4,823) (6,950)
Equity pick-up in subsidiaries - - 9,503 (6,685)
Contributions and grants not deductible (2,533) (3,559) (2,533) (3,559)
Social contribution rate adjustment - 12,921 - 12,921
Fiscal incentive 4,135 - 4,135 -
Other 11,852 (359) 12,434 203
-------------- ------------ ------------ -----------
Income and social contribution tax (expenses) benefits in
income statement (480,128) 126,809 (465,368) 112,279
============== ============ ============ ===========
11) BONUS, NET OF SURCHARGE, AND COSTS TO BE REIMBURSED AS A RESULT OF THE
ELECTRICITY RATIONING PLAN
Through the Energy Crisis Committee, the Federal Government established
electric energy consumption targets for all consumers for areas affected by
the Electricity Rationing Plan in effect during the period from June 2001 to
February 2002. A financial bonus was established for residential consumers
whose electric energy consumption was lower than the target, and surcharges
were established for all consumers whose consumption exceeded the target,
calculated based on the effective consumption in excess of such target, as
established by the Energy Crisis Committee. The balances related to the bonus,
costs and surcharge, to be reimbursed by the Federal Government, are as
follows:
Consolidated and Company
---------------------------------
September 30, June 30,
2003 2003
--------------- --------------
Bonus paid to consumers that consumed less than the consumption target 23,449 23,449
Costs incurred related to the adoption of the Electricity Rationing Plan in
excess of the 2.00% surcharge on consumer tariffs 15,140 22,107
--------------- --------------
38,589 45,556
--------------- --------------
Current 15,140 22,107
Noncurrent 23,449 23,449
=============== ==============
Part of the surcharges, in the amount of R$23,449, were not collected from
consumers since they were subject to a judicial dispute during the Electricity
Rationing Plan. As a result, ANEEL has not reimbursed the Company for the
bonuses relating to the unbilled surcharge. This issue is under negotiation
with the Ministry of Mines and Energy. Management does not expect losses on
the realization of this amount.
In conformity with ANEEL Resolution No. 600, dated October 31, 2002, the
operation costs related to the adoption of the Electricity Rationing Plan in
excess of the 2.00% surcharge on consumer tariffs is being recovered through a
rate increase in effect since April 8, 2003.
15
12) RECEIVABLES FROM THE FEDERAL GOVERNMENT - REVENUE LOSSES FROM LOW-INCOME
CONSUMERS
The new classification criteria, established by the Federal Government, for
low income consumers resulted in a decrease in distributors' revenues from
electricity sales to final customers, including CEMIG, due to the lower rate
applied to those customers. The Federal Government, through Centrais Eletricas
Brasileiras S.A. - Eletrobras, is reimbursing the distributors for billing
losses incurred since May 2002.
In July 2003, Eletrobras reimbursed CEMIG for billing losses incurred during
the period from May 2002 to May 2003 in the amount of R$79,838. The funds were
used to pay off part of the financing previously approved by Eletrobras in the
amount of R$34,959 and to pay part to the Energy development account in the
amount of R$44,879.
The amount recorded as of September 30, 2003 refers to billing losses incurred
during the period from June 2003 to September 2003. A portion of the billing
losses, in the amount of R$15,870, was reimbursed by Eletrobras in October
2003.
13) INVESTMENTS
Consolidated Company
-----------------------------------------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
------------- ------------ -------------- ------------
Equity in subsidiaries
Empresa de Infovias S.A. - - 240,359 248,409
Companhia de Gas de Minas Gerais - GASMIG - - 101,160 92,280
Usina Termica Ipatinga S.A. - - 77,993 77,458
Sa Carvalho S.A. - - 100,022 97,522
Horizontes Energia S.A. - - 63,555 64,258
Cemig Capim Branco Energia S.A. - - 16,224 15,790
Cemig PCH S.A. - - 28,537 23,023
UTE Barreiro S.A. - - 4,957 4,764
Efficientia S.A. - - 2,126 1,903
Cemig Trading S.A. - - 10 10
------------- ------------ -------------- ------------
- - 634,943 625,417
In consortiums for power plant construction 754,474 717,095 738,254 701,320
Goodwill on purchase of Infovias 9,510 9,510 9,510 9,510
Other investments 12,799 10,379 8,988 6,517
------------- ------------ -------------- ------------
776,783 736,984 1,391,695 1,342,764
============= ============ ============== ============
(a) The principal information related to consolidated subsidiaries as of
September 30, 2003, is as follows:
Nine-month
period ended
September 30, September 30,
2003 2003
----------------------------------------- ----------------
Cemig Shareholders' Net income
Subsidiaries Interest - % Capital equity (loss)
------------- ----------- ------------- ----------------
Empresa de Infovias S.A. * 99.92 291,000 222,624 (10,351)
Companhia de Gas de Minas Gerais -GASMIG * 95.19 46,067 106,270 18,612
Usina Termica Ipatinga S.A. 100.00 74,633 77,993 3,273
Sa Carvalho S.A. 100.00 86,833 100,022 16,345
Horizontes Energia S.A. 100.00 62,871 63,555 (703)
Cemig Capim Branco Energia S.A. 100.00 1 16,224 -
Cemig PCH S.A. 100.00 1 28,537 -
UTE Barreiro S.A. 100.00 1 4,957 -
Efficientia S.A. 100.00 10 2,126 (1,003)
Cemig Trading S.A. 100.00 10 10 -
(*) Information as of August 31, 2003.
16
Income derived from equity in subsidiaries for the first nine months of 2003
includes a R$2,641 credit, resulting from the Company's calculation of its
equity in subsidiaries in its December 31, 2002 financial statements using
preliminary financial statements.
As of September 30, 2003, CEMIG had advances for a capital increase not yet
converted into equity in Infovias in the amount of R$17,906, recorded as
Investments.
Infovias started operations in January 2001 and its subsidiary WAY TV Belo
Horizonte S.A. in 2002. These businesses are considered strategic for CEMIG's
existing infrastructure. The telecommunications business will require
additional investments to be considered complete and competitive. Periodic
evaluations of Infovias and WAY TV Belo Horizonte S.A. are performed, in order
to determine their ability to run their businesses on a stand-alone and
profitable basis, as well as for determining the need for an impairment
reserve for this investment. Currently, available projections do not reveal
the need for such an impairment reserve.
The special review report for the quarterly information as of September 30,
2003 of the independent accountants of Infovias is not yet completed. The
independent accountants' special review report on the quarterly information of
Infovias, as of June 30, 2003, included comments on: (i) deferred income and
social contribution taxes and the maintenance of the recoverable State VAT -
ICMS, whose realization is based on future taxable income and the continuity
of the investment plan; and (ii) the need for additional resources from
shareholders or third parties to fund its operations, as well as to ensure the
recoverability of its assets at the recorded amounts in its financial
statements, until Infovias' own operating revenues are enough to absorb these
amounts. The mentioned comments are applicable to Infovias and its controlled
company, Way TV Belo Horizonte S.A.
The Company has signed agreements with Infovias for the lease of CEMIG's
network infrastructure, intra-company data transmission services,
geo-referenced information and data supply. These agreements are still subject
to approval by ANEEL.
ANEEL may seek to impose a fine relating to such agreements if it concludes
that they are not in compliance with ANEEL regulations. The maximum penalty is
a fine, in an amount equal to 2% of the Company's gross revenues during the
12-month period immediately prior to the imposition of such fine. Management
believes that it has a meritorious defense against ANEEL in relation to this
matter. Additionally, ANEEL may impose restrictions on the agreements' terms
and conditions.
(b) Consortiums
CEMIG and its subsidiary, Cemig Capim Branco Energia S.A. are partners with
other companies in certain consortiums for electricity generation projects.
The consortiums, which are not separate legal entities, were created to manage
related concession contracts. The Company and its subsidiary maintain
accounting records of their share in the consortiums assets, as follows:
CEMIG's Annual
participation average
in energy depreciation September 30, June 30,
generation rate 2003 2003
-------------- -------------- --------------- ---------------
Company
In Operation
Porto Estrela Hydroelectric Power Plant 33.33% 2.49% 38,625 38,625
Igarapava Hydroelectric Power Plant 14.50% 2.56% 54,457 54,457
Funil Hydroelectric Power Plant 49.00% 2.49% 171,781 160,014
( - )Accumulated depreciation (6,869) (6,304)
--------------- ---------------
Total in operation 257,994 246,792
Under Construction
Queimado Hydroelectric Power Plant 82.50% 181,474 170,336
Aimores Hydroelectric Power Plant 49.00% 298,786 284,192
--------------- ---------------
Total under construction 480,260 454,528
--------------- ---------------
Total Company 738,254 701,320
Cemig Capim Branco S.A.
Capim Branco Hydroelectric Power
Plants I and II 21.05% 16,220 15,775
--------------- ---------------
Total Consolidated 754,474 717,095
=============== ===============
17
The realization of the consortiums' investments will occur simultaneously with
depreciation on the consortiums' assets, under property, plant and equipment,
calculated on a straight-line basis, according to rates established by ANEEL.
14) PROPERTY, PLANT AND EQUIPMENT
Annual Consolidated Company
average ------------------------------- -------------------------------
depreciation September 30, June 30, September 30, June 30,
rate - % 2003 2003 2003 2003
------------- --------------- ------------- --------------- -------------
In service
Generation-
Hydroelectric 2.47 5,516,222 5,515,358 5,367,843 5,366,978
Thermoelectric 1.83 217,112 216,708 132,528 132,124
Transmission 3.08 1,088,480 1,089,967 1,088,480 1,089,967
Distribution 5.21 6,906,926 6,805,836 6,906,926 6,805,836
Administration 9.63 269,668 272,041 269,166 271,567
Telecom 7.79 334,723 322,418 - -
Gas 5.96 64,906 64,309 - -
---------------- -------------- ---------------- --------------
14,398,037 14,286,637 13,764,943 13,666,472
Accumulated depreciation and
amortization
Generation (2,236,085) (2,200,447) (2,211,097) (2,178,563)
Transmission (487,838) (480,469) (487,838) (480,469)
Distribution (2,835,756) (2,777,471) (2,835,756) (2,777,471)
Administration (148,701) (146,426) (148,662) (146,402)
Telecom (43,357) (35,082) - -
Gas (18,442) (17,136) - -
---------------- -------------- ---------------- --------------
(5,770,179) (5,657,031) (5,683,353) (5,582,905)
---------------- -------------- ---------------- --------------
Total in service 8,627,858 8,629,606 8,081,590 8,083,567
---------------- -------------- ---------------- --------------
Construction in progress-
Generation 436,124 354,525 398,986 323,282
Transmission 102,478 76,842 102,478 76,842
Distribution 363,258 419,438 363,258 419,438
Administration 32,898 37,731 32,898 37,731
Telecom 11,138 22,438 - -
Gas 28,914 23,692 - -
---------------- -------------- ---------------- --------------
Total construction in progress 974,810 934,666 897,620 857,293
---------------- -------------- ---------------- --------------
9,602,668 9,564,272 8,979,210 8,940,860
---------------- -------------- ---------------- --------------
Special liabilities (1,647,363) (1,618,607) (1,647,363) (1,618,607)
---------------- -------------- ---------------- --------------
Total 7,955,305 7,945,665 7,331,847 7,322,253
================ ============== ================ ==============
Special liabilities refers primarily to consumers' contributions to support
construction necessary to meet energy supply orders. Our obligation to satisfy
these special liabilities depends on ANEEL's disposition at the end of the
distribution concessions through reduction of the residual value of property,
plant and equipment to define the value that the Federal Government will pay
to the concessionaires. According to accounting principles and electric energy
sector legislation in effect in Brazil, these amounts are not subject to
restatement, amortization or depreciation.
18
15) SUPPLIERS
Consolidated Company
------------------------------ ------------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
-------------- ------------ --------------- ------------
Current
Electricity supply
Eletrobras - Energy from Itaipu 421,034 413,737 421,034 413,737
Furnas 51,494 44,004 51,494 44,004
Wholesale Energy Market - MAE - 397,563 - 397,593
Wholesale Energy Market - MAE - judicial claim 142,560 134,509 142,560 134,509
Transfer to generators 80,803 79,645 80,803 79,645
Other 39,350 32,786 39,350 32,786
--------------- ------------- ---------------- -------------
728,539 1,102,244 728,539 1,102,244
Supplies and services 81,948 100,102 53,526 68,263
--------------- ------------- ---------------- -------------
810,487 1,202,346 782,065 1,170,507
=============== ============= ================ =============
Long term
Electricity supply -
Transfer to Generators 345,944 333,974 345,944 333,974
=============== ============= ================ =============
In February 2003 and July 2003, the Company paid R$335,482 and R$372,545,
respectively, related to the MAE, as described in Note 8.
Any differences between CEMIG's estimates and the effective values and
judicial claims currently in progress, filed by market agents, related to the
interpretation of the market rules in effect, may change the recorded amounts
related to the MAE.
As of September 30, 2003, CEMIG had overdue amounts to be paid to Eletrobras,
subject to exchange variation and monthly interest of 1%, relating to the
purchase of energy from Itaipu, in the amount of R$210,588 (R$236,414 as of
June 30, 2003).
16) TAXES PAYABLE
Consolidated Company
------------------------------ ------------------------------
September 30, June 30, September 30, June 30,
2003 2003 2003 2003
-------------- ------------ --------------- ------------
Current
Income tax 94,909 84,670 91,982 83,958
Social contribution tax 43,145 38,961 40,630 37,025
State VAT - ICMS 164,463 157,179 161,989 155,265
COFINS - Tax on revenue 32,877 32,091 32,120 31,300
PASEP - Tax on revenue 14,446 13,594 14,064 13,185
INSS - social security 8,675 8,799 8,638 8,510
Other 6,080 11,596 5,153 4,838
-------------- ------------ --------------- ------------
364,595 346,890 354,576 334,081
============== ============ =============== ============
Long Term
Deferred obligations
Income tax 362,533 334,878 362,533 334,878
Social contribution tax 130,512 120,557 130,512 120,557
COFINS 46,378 45,870 46,378 45,870
PASEP 24,181 23,635 24,181 23,635
-------------- ------------ --------------- ------------
563,604 524,940 563,604 524,940
Tax credits
Income tax (111,894) (148,979) (111,894) (148,979)
Social contribution tax (40,282) (53,633) (40,282) (53,633)
COFINS - - - -
PASEP (5,544) (5,143) (5,544) (5,143)
-------------- ------------ --------------- ------------
(157,720) (207,755) (157,720) (207,755)
-------------- ------------ --------------- ------------
405,884 317,185 405,884 317,185
============== ============ =============== ============
The federal taxes recorded under long-term liabilities refer to net deferred
obligations and rights on assets and liabilities in accordance with the
General Agreement of Electricity Sector, which are due according to the
realization of these assets and liabilities.
19
The reduction in deferred tax credits in the third quarter of 2003 was due to
the payment of obligations by CEMIG related to the MAE energy transactions
during the period which the Electricity Rationing Plan was in effect.
Therefore, the tax credits were used to compensate the payments of federal
taxes.
17) LOANS, FINANCING AND DEBENTURES
June 30,
September 30, 2003 2003
------------------------------------------------ -----------
Long
Current Portion Term
----------------------- ---------
LENDERS Principal Interest Principal Total Total
------------------------------------------------ ----------- ---------- --------- --------- ------------
IN FOREIGN CURRENCY
ABN AMRO Bank - N. V. 19,489 643 19,489 39,621 38,302
Banco BNL do Brasil S.A. - 13 16,058 16,071 15,789
Banco do Brasil S.A. - Various Bonds 16,365 7,077 237,778 261,220 256,736
Banco do Brasil S.A. II 40,148 208 - 40,356 80,248
Banco do Brasil S.A. III - 5,392 116,936 122,328 116,594
Banco do Brasil S.A. IV 103,781 6,295 - 110,076 103,235
-Inter-American Development Bank - IDB 14,834 411 18,209 33,454 40,551
Banco Itau - S.A. I 24,362 282 121,808 146,452 147,133
Banco Itau - S.A. II 19,489 1,016 48,723 69,228 67,337
Banco Itau - BBA (MAE) III 121,591 1,180 - 122,771 -
Banco Itau - BBA IV 89,636 632 - 90,268 -
Citibank N.A I - - - - 22,155
Citibank N.A II 33,911 179 - 34,090 68,142
Citibank N.A III - 1,429 32,158 33,587 32,046
Citibank N.A IV 15,188 496 15,189 30,873 29,848
KFW 2,255 353 28,141 30,749 29,489
Lloyds Tsb Bank Plc 7,309 481 7,309 15,099 14,513
Siemens LTDA. I 23,203 - 23,203 46,406 58,375
Siemens LTDA. II 91,596 1,489 - 93,085 180,384
ING Bank - Eurobonds - 2,703 78,981 81,684 78,439
Other 14,491 1,401 59,569 75,461 72,952
----------- ---------- --------- --------- ------------
Total foreign currency financing 637,648 31,680 823,551 1,492,879 1,452,268
IN LOCAL CURRENCY
BNDES (MAE) 75,204 4,333 414,211 493,748 328,062
Unibanco (MAE) 100,000 5,856 - 105,856 -
Centrais Eletricas Brasileiras S.A. - ELETROBRAS 77,325 656 276,627 354,608 403,989
Debentures I - 99,355 849,626 948,981 910,669
Debentures II - - 27,319 27,319 27,010
Large Consumers - TELEMIG/ C.V.R.D. 2,765 2,030 3,770 8,565 7,789
UHESC S.A. - 5,643 47,384 53,027 50,686
Other 7,742 3,105 58,131 68,978 64,037
----------- ---------- --------- --------- ------------
Total local currency financing 263,036 120,978 1,677,068 2,061,082 1,792,242
----------- ---------- --------- --------- ------------
Escrow accounts (1) (95,133) - (99,665) (194,798) (170,979)
----------- ---------- --------- --------- ------------
TOTAL COMPANY 805,551 152,658 2,400,954 3,359,163 3,073,531
----------- ---------- --------- --------- ------------
CONSOLIDATED
MBK Furukawa Sistemas S.A. 18,256 2,741 73,004 94,001 91,632
UTE Barreiro 68 24 1,289 1,381 1,357
Other 2,039 - 3,616 5,655 6,405
----------- ---------- --------- --------- ------------
TOTAL CONSOLIDATED 825,914 155,423 2,478,863 3,460,200 3,172,925
=========== ========== ========= ========= ============
According to the above table, the Interest and maturity dates of loans,
financing and debentures of CEMIG are as follows:
20
Payments of Annual Interest
LENDERS Principal rates (%) Currency
--------------------------------------------------------- ----------- --------------------- ----------------------
IN FOREIGN CURRENCY
ABN AMRO Bank - N. V. 2003/2005 Libor + 4.25 US$
Banco BNL do Brasil S.A. 2004/2005 Libor + 0.50 US$
Banco do Brasil S.A. - Various Bonds 1997/2024 Various US$
Banco do Brasil S.A. II 2004 Libor + 3.13 US$
Banco do Brasil S.A. III 2004 10.38 US$
Banco do Brasil S.A. IV 2003 16.00 US$
-Inter-American Development Bank - IDB 1984/2006 4.00 to 7.67 US$+ Unit of account
Banco Itau - S.A. I 2004/2007 Libor + 3.25 US$
Banco Itau - S.A. II 2002/2004 Libor + 2.45 US$
Banco Itau - BBA (MAE) III 2003 3.97 US$
Banco Itau - BBA IV 2004 Various US$
Citibank N.A I 2001/2003 Libor + 2.84 US$
Citibank N.A II 2002/2004 Libor + 5.50 US$
Citibank N.A III 2004 10.00 US$
Citibank N.A IV 2003/2005 Libor + 4.25 US$
KFW 2001/2016 4.50 EURO
Lloyds Tsb Bank Plc 2002/2004 Libor + 6.00 US$
Siemens LTDA. I 2003/2004 Libor + 4.25 US$
Siemens LTDA. II 2003/2005 9.97 US$
ING Bank - Eurobonds 2004 9.13 US$
Other 1997/2007 Various Various
IN LOCAL CURRENCY
BNDES (MAE) 2003/2008 SELIC + 1.00 R$
Unibanco - (MAE) 2003 CDI + 2.00 R$
IGP-M. FINEL. UFIR +
Centrais Eletricas Brasileiras S.A. - ELETROBRAS 1995/2023 5.00 a 10.00 R$
Debentures I 2005/2006 IGP-M + 12.70 R$
Debentures II 2027 IGP-M R$
Large Customers - TELEMIG/ C.V.R.D. 1982/2011 Various R$
UHESC S.A. 2005 IGP-M + 14.66 R$
Other 1994/2007 Various R$
CONSOLIDATED
MBK Furukawa Sistemas S/A 2002/2008 Libor + 5.45 US$
Toshiba do Brasil S.A. 2002/2009 Libor + 6.00 US$
Other 2002/2009 Various R$
The composition of financing by currency and local currency by index is as
follows:
Consolidated Company
-------------------------------- --------------------------------
September June 30, September June 30,
30, 2003 2003 30, 2003 2003
--------------- --------------- --------------- ---------------
Currency -
U.S. dollar 1,488,424 1,439,475 1,393,042 1,346,486
EURO 65,809 66,597 65,809 66,597
Unit of account (basket of currencies) 31,509 39,185 31,509 39,185
Other 2,519 - 2,519 -
--------------- --------------- --------------- ---------------
1,588,261 1,545,257 1,492,879 1,452,268
Indexes -
Indice Geral de Precos - IGP-M (General
Price Index) 1,139,757 1,107,713 1,139,957 1,107,713
Indice Interno da Eletrobras - FINEL
(Eletrobras Internal Index) 142,717 146,478 142,717 146,478
UFIR (Tax Reference Unit) 115,443 152,813 115,443 152,813
SELIC (Brazilian benchmark interest rate) 493,748 328,062 493,748 328,062
Other 175,072 63,581 169,417 57,176
--------------- --------------- --------------- ---------------
2,066,737 1,798,647 2,061,082 1,792,242
Escrow accounts (1)
Income based on CDI (Interbank
certificate of deposit) (48,850) (54,982) (48,850) (54,982)
Income based on U.S. dollar variation (145,948) (115,997) (145,948) (115,997)
--------------- --------------- --------------- ---------------
(194,798) (170,979) (194,798) (170,979)
--------------- --------------- --------------- ---------------
3,460,200 3,172,925 3,359,163 3,073,531
=============== =============== =============== ===============
21
(1) Refers to restricted use funds for payment of foreign currency-denominated
financing, in compliance with Banco Central do Brasil - BACEN (Brazilian
Central Bank) Resolution No. 2,515 of June 29, 1998.
The variations in the principal currencies and indices used to restate the
loans, financing and debentures are as follows:
Variation
Variation Variation from Variation from from January
from July 1 January 1 to July 1 to 1 to
to September September 30, September 30, September
30, 2003 2003 2003 30, 2003
Currency % % Indices % %
-------------------------- -------------- ---------------- ---------------------- ---------------- ----------------
Indice Geral de Precos
- IGP-M
U.S. dollar 1.79 (17.26) (General Price Index) 1.14 7.11
Indice Interno da
Eletrobras - FINEL
(Eletrobras Internal
Euro 3.09 (7.78) Index) 0.23 1.40
Unit of account (Basket SELIC (Brazilian
of currencies) 1.37 3.63 benchmark interest rate) 5.63 18.10
Two of the Company's financing contracts with a single lender, in the total
amount of R$340,058 as of September 30, 2003, of which R$244,673 is classified
under long-term liabilities, contains certain financial covenants, which CEMIG
has not complied with. Such noncompliance may cause the amounts owed under the
contract to become immediately due. In addition, the Company has financing
contracts that contain cross-default clauses. The Company has obtained a
waiver from the creditor that is party to such contracts containing the debt
covenants which the Company has not satisfied. The waiver affirms that such
creditor will not exercise its rights to demand compliance with accelerated or
immediate payment of the total amounts due as of December 31, 2002, March 31,
2003, June 30, 2003 and September 30, 2003.
The Company believes that such noncompliance of debt covenants was an unusual
event, and that its operations for the next quarters will allow for total
compliance with of all debt covenants. In order to avoid acceleration, the
aforementioned waiver must be maintained in effect until the original terms of
the contracts are fully met. Financing and debentures are classified as
current and long-term liabilities according to the original contract terms, in
light of the waiver obtained.
Infovias' financing contract from MBK Furukawa Sistemas S.A. / Unibanco, in
the amount of R$94,001 as of August 31, 2003, of which R$73,004 is classified
under long-term liabilities, contains certain covenants, which Infovias has
not complied with. Such noncompliance may cause the amount owed under the
contract to become immediately due. Infovias has obtained a waiver from the
creditors that are parties to this contract. The waiver affirms that such
creditors will not exercise their rights to demand accelerated or immediate
payment of the total amount due. The waiver obtained must be renewed every
quarter until the original terms of the restricted clauses are met. This
financing is classified as current and long-term liabilities according to the
original terms of the respective contracts, in light of the waiver obtained.
CEMIG guarantees this contract and any payments made by CEMIG will be
converted into preferred shares of Infovias.
22
18) RESERVE FOR CONTINGENCIES
CEMIG and its subsidiaries are parties to certain legal proceedings in Brazil
arising from the normal course of business and relating to tax, labor, civil
and other issues.
The Company's management believes that any loss in excess of the amounts
provided for, in respect of such contingencies, will not have a material
adverse effect on the Company's results of operations or financial position.
For those contingencies for which a favorable outcome has been deemed remote,
the Company has fully recognized provisions for potential losses, as follows:
Consolidated and Company
-----------------------------------
September 30, June 30,
2003 2003
------------------ ---------------
Labor claims 87,111 81,772
Civil lawsuits - Consumers 95,152 95,000
Social contribution tax 107,778 102,797
Finsocial (tax on revenue) 19,897 19,726
Civil lawsuits - Others 30,337 30,289
Other 31,652 27,831
------------------ ---------------
371,927 357,415
================== ===============
Certain details relating to such reserves are as follows:
(a) Labor claims
The labor claims relate principally to overtime and hazardous occupation
compensation. The total exposure for those matters is estimated to be
R$108,889 as of September 30, 2003 (R$102,215 as of June 30, 2003). The
Company recorded during the period from January to September, 2003 a
provision in the amount of R$17,405 (R$9,661 during the period from
January to September 2002). CEMIG determines the amounts to be reserved
based on the nature of the group of claims and the most recent court
decisions.
(b) Civil lawsuits - Consumers
A number of industrial consumers have brought legal action against the
Company seeking refunds of amounts paid to CEMIG as a result of a rate
increase that became effective during the Brazilian government's economic
stabilization "Cruzado Plan" in 1986, alleging that such increases
violated the price controls instituted as part of that plan. CEMIG
determines the amounts to be reserved based on the amount billed subject
to consumers' claims and recent court decisions.
The total estimated exposure to the Company for those claims, fully
provided for, was R$95,152 as of September 30, 2003 (R$95,000 as of June
30, 2003). This amount is fully provisioned.
(c) Social contribution tax
The Company is deducting the amounts of depreciation, amortization and
write-off of the supplementary monetary restatement of property, plant
and equipment, for purposes of computation of social contribution tax.
The Company estimates that its potential exposure in this matter is
approximately R$107,778, as of September 30, 2003 (R$102,797 as of June
30, 2003). This amount is fully provisioned.
(d) Finsocial
In 1994, CEMIG was fined by the Brazilian federal tax authorities for the
exclusion of State VAT from the Finsocial calculation, a tax on revenue
extinguished in 1992. The Company estimated that its potential exposure
in this matter is approximately R$19,897 as of September 30, 2003
(R$19,726 as of June 30, 2003). This amount is fully provisioned.
23
(e) Other
Other reserves are related to a number of lawsuits involving the Federal
Government, in which the Company is disputing the constitutionality of
certain federal taxes that have been assessed against it and other
general claims arising from the ordinary course of business.
(f) Legal proceedings in which a favorable outcome is probable
CEMIG has other relevant legal proceedings for which the Company
considers a favorable outcome to be probable. Certain details relating to
such matters are as follows:
(i) Litigation involving FORLUZ
The Company is defending, together with Fundacao Forluminas de Seguridade
Social - FORLUZ, a claim brought by its employees' labor union
("Sindieletro") contesting the suspension of increases in the Company's
required contribution to the pension fund pursuant to periodic monetary
restatements. The total amount sought in this claim is R$658,931. No
reserve has been recorded for this claim, since the Company believes that
it has a meritorious defense to such claim and, consequently, does not
expect to incur losses related thereto.
Sindieletro is contesting FORLUZ for changing the pension fund's
contribution adjustment index from the IGP-DI to the IPCA - IPEAD
(consumer price index calculated by Minas Gerais Accounting Management
and Economic Research Institute of Minas Gerais Federal University). The
total amount sought in this claim is R$289,818. Since the Company
believes that FORLUZ has a meritorious defense to such claim, no reserve
has been recorded for this potential claim.
(ii) Income and social contribution taxes on post- retirement benefits
On October 11, 2001, the Brazilian Federal Tax Authorities (Secretaria da
Receita Federal) issued an assessment notice, in the restated amount of
R$243,959, arising from the utilization of tax credits that resulted from
the amendment of the Company's 1997, 1998, 1999 and 2000 tax returns. The
tax returns were amended as a result of a change in accounting method for
recording post-retirement benefit liabilities. The additional employee
post-retirement benefits liabilities that resulted from the accounting
change were recognized in the revised fiscal years, resulting in net
operating tax losses and social contribution tax carryforwards. No
reserve has been recorded as a result of this notice, since the Company
believes that the procedures which generated the tax credits are legally
sound.
The tax credits mentioned in the preceding paragraph were offset against
federal taxes paid in 2001 and 2002. Due to this offset, CEMIG was
exposed to additional penalties in the amount of R$192,039. No reserve
for contingencies has been made to cover any liabilities that may result
from the tax assessment, since CEMIG believes that it has solid legal
grounds, which support the procedures adopted.
In 2003, Brazilian Federal Tax Authorities, after performing an audit on
the Company's Tax Returns, issued an assessment notice, in the amount of
R$1,153,080, claiming that the Company did not pay all its tax
liabilities related to the 1997-2001 Tax Returns. CEMIG presented an
administrative defense requesting that such assessment notice be canceled
as the Brazilian Federal Tax Authorities did not considered any of the
Company's Amended Tax Returns, which have already been filed by the
Company. Such Amended Tax Returns demonstrate that the Company has
properly collected the tax liabilities challenged. No reserve has been
recorded for this claim, since the Company believes that it has a
meritorious defense to such claim, either under administrative or
judicial courts.
24
(iii) COFINS
The Company began contesting the payment of COFINS (tax on revenue) in
1992. As a result of an unfavorable court ruling, the Company paid
R$239,266 of COFINS tax on July 30, 1999. The Federal Government is
claiming that the Company owes approximately R$149,655 in additional
fines and interest relating to the non-payment of COFINS. The Company is
contesting such claim. No reserve has been recorded for this claim, since
the Company believes that it has a meritorious defense against such claim
and, consequently, does not expect to incur losses related thereto.
(iv) Regulatory agency acts
ANEEL has a regulatory proceeding pending against CEMIG claiming that
CEMIG owes the Federal Government R$202,813 due to a miscalculation of
credits in the amount of the cumulative rate deficit (CRC) applied to
reduce amounts owed to the Federal Government. On October 31, 2002, ANEEL
issued a final decision against the Company. The Company believes that it
has a meritorious defense against such claim and has therefore recorded
no reserve in respect thereto.
(v) Settlement of the MAE obligations
In December 2002, CEMIG filed a lawsuit against ANEEL and MAE contesting
the amounts charged during the settlement process carried out by the MAE
in December 2002 and January 2003. This process was intended to settle
the outstanding amounts that the Company and other electric
concessionaires owed to the MAE in connection with spot market energy
purchases since September 2000.
As a result of the lawsuit filed, CEMIG did not settle its outstanding
MAE obligations at the date determined by the MAE. The Company has filed
an additional lawsuit to prevent the imposition of a fine relating to the
non-compliance with the MAE determination. Such fine, if imposed, would
amount to approximately R$4,276. The Company expects to be successful in
this lawsuit and, accordingly, no provision has been recorded for this
contingency.
(vi) Civil lawsuits - Consumers
Various consumers have brought civil claims against CEMIG contesting rate
adjustments applied in prior years, including rate subsidies granted to
low-income consumers and the special rate adjustment. It is not possible
at the present time to estimate the amounts involved in these claims. The
Company believes that it has a meritorious defense and, therefore, no
provision has been recorded for such claims.
The Company is a defendant in some lawsuits contesting the Emergency
Capacity Charge. The Company collects the Emergency Capacity Charge from
its customers on behalf of Comercializadora Brasileira de Energia
Eletrica - CBEE, a federal government agency set up to supply energy to
utilities in the event of future shortages. It is not possible at the
present time to estimate the amounts involved in these claims. No accrual
has been recorded for these claims since the Company believes that it has
a meritorious defense.
The Company is a defendant, with Companhia Vale do Rio Doce - CVRD,
Comercial e Agricola Paineiras and Companhia Mineira de Metais, in a
class action lawsuit, brought by the citizens of the State Minas Gerais.
This lawsuit seeks to nullify the environmental licenses relating to the
Capim Branco I and Capim Branco II hydroelectric power plants. The
Company believes that it has a meritorious defense to this lawsuit.
The Company is also a defendant together with CVRD, in a class action
lawsuit, brought by the citizens of the State of Minas Gerais. This
lawsuit seeks to nullify the environmental license relating to Aimores
hydroelectric power plant as well as the related concession. Management
believes that it has a meritorious defense to this lawsuit.
In addition to the matters described above, CEMIG and its subsidiaries are
involved as a plaintiff or defendant in a variety of routine litigation
arising from the normal course of business. With respect to the
25
litigation that CEMIG and its subsidiaries are named as defendants, management
believes that it has an adequate defense against such litigation and that any
losses therefrom would not have a material adverse effect on the consolidated
financial position and results of operations of the Company.
19) EMPLOYEE POST-RETIREMENT BENEFITS
Since 1973, the Company has been the sponsor of FORLUZ, a non-profit entity
with the purpose of providing its associates, participants and their
dependants with additional income to supplement the government pension, in
accordance with the pension plan to which they are linked.
FORLUZ offers its associates the following supplementary pension plans:
Mixed Benefit Plan - A defined contribution plan for normal retirement and a
defined benefit plan for coverage of active participant's disability and
death. The Company's contribution is equivalent to the associate's monthly
basic contributions and is the only plan available for new participants.
Settled Benefit Plan ("Plan A") - Includes all retired participants who opted
for this plan and the balances, as of the option date, of active participants
who opted for migrating from the Defined Benefit Plan to the above-mentioned
Mixed Benefit Plan.
Defined Benefit Plan - Benefit plan adopted by FORLUZ until 1998, in which the
Federal Government Social Security benefit is supplemented in relation to the
actual average salary of the employee's final years of service in the Company.
Only 55 retirees are enrolled in this plan.
In addition to the pension plans provided by FORLUZ, the Company also pays
part of the life insurance premium for its retirees and of the health care
plan for employees, retirees and their dependants. These plans are also
managed by FORLUZ.
The changes in net post-retirement liabilities are as follows:
Pension plan and
supplementation
of retirement Health care Life insurance
---------------- ----------- --------------
Net liabilities as of June 30, 2003 1,315,044 202,660 259,695
Net periodic cost recorded in the income statement (2,929) 6,383 8,423
Contributions paid (76,123) (4,134) (500)
---------------- ----------- --------------
Net liabilities as of September 30, 2003 1,235,992 204,909 267,618
================ =========== ==============
Part of the deficit in FORLUZ's actuarial reserves in the amount of
R$1,549,579 as of September 30, 2003 (R$1,601,007 as of June 30, 2003) was
recognized as obligations payable by the Company. These obligations are being
amortized through monthly installments, through June 2024, calculated under
the fixed-installment system ("Price Table"). Part of these amounts are
restated annually according to the salary adjustment index for the Company's
employees (not including productivity) included in the defined benefit plan,
and part is adjusted according to the IPCA - IPEAD, plus 6% per year.
(a) Changes in retirement criteria and other negotiations
In September 2003, CEMIG, Sindieletro and representative entities of retirees
reached an agreement on changes related to the retiring criteria and other
issues related to FORLUZ. The main changes were:
o FORLUZ will withdraw minimum age retiring requirements, 55 and 53
for normal and special retirement, for employees and participants
hired from January 24, 1978 to April 2, 1979. The Company will not
give retroactive benefits to retired participants who had met such
requirements.
o FORLUZ will change Plan A rules in order to allow the payment of
proportioned pension benefits to employees who reached a certain
contribution period (30 and 25 years of contribution for men and
women, respectively), who have not yet retired under the Official
Social Security Program, and who opt to leave the Company.
26
o CEMIG agreed to give a 3.67% additional increase in the benefits of
Plan A, if Plan A surplus reaches a technical surplus higher than
R$400 million by the end on 2003, to be applied retroactively to
June 1, 2000. This change is due to the fact that some of FORLUZ's
participants contested the change in the pension fund adjustment
index from the IGP-DI to the IPCA - IPEAD, requesting an increase in
the benefits arising from the difference between the two indexes.
The above mentioned changes will be in effect only after all the judicial
claims filed by those entities related to those matters are withdrawn. The
effects of those changes cannot yet be estimated by the Company nor by its
independent actuaries and, therefore, will be recorded in the Company's
financial statements as of December 31, 2003.
20) SHAREHOLDERS' EQUITY
The change in shareholders' equity is as follows:
Balance as of June 30, 2003 6,216,459
Net income for the quarter ended September 30, 2003 277,700
----------------
Balance as of September 30, 2003 6,494,159
================
In September 1999, the State Government filed a lawsuit seeking to nullify the
shareholders' agreement signed in 1997 with Southern Electric Brasil
Participacoes Ltda. On August 7, 2001, the Minas Gerais State Court of Appeals
upheld the lower court ruling declaring the shareholders' agreement null and
void. Southern Electric Brasil Participacoes Ltda. appealed the decision which
was rejected by the Minas Gerais State Court of Appeals in October, 2001.
Southern Electric Brasil Participacoes Ltda. has appealed the Court's latest
decision.
21) ELECTRICITY SALES
The composition of electricity sales to final customers is as follows:
Consolidated
--------------------------------------------------------------------------------------
(Not reviewed by independent accountants)
-------------------------------------------------------
No. of consumers MWh R$
-------------------------- --------------------------- --------------------------
Nine-month period ended Nine-month period ended Nine-month period ended
September 30, September 30, September 30,
-------------------------- --------------------------- --------------------------
2003 2002 2003 2002 2003 2002
------------- ----------- ------------- ------------ ------------- -----------
Residential 4,697,553 4,586,863 4,896,586 4,710,103 1,704,185 1,275,029
Industrial 68,657 67,668 16,129,649 16,425,089 2,081,996 1,601,054
Commercial 520,389 512,666 2,515,268 2,415,082 748,629 568,137
Rural 361,561 332,427 1,298,083 1,230,838 238,093 179,967
Public authorities 44,441 43,031 372,155 336,852 104,413 75,747
Public lighting 2,163 2,661 747,015 657,449 132,000 94,568
Public services 6,992 6,770 724,549 707,623 124,220 93,491
Own consumption 1,321 1,358 40,436 37,032 - -
Unbilled, net - - - - 83,739 54,868
------------- ----------- ------------- ------------ ------------- -----------
5,703,077 5,553,444 26,723,741 26,520,068 5,217,275 3,942,861
Supply to other concessionaires 5 4 207,690 244,117 15,119 15,168
MAE transactions - - - - 34,985 473,964
------------- ----------- ------------- ------------ ------------- -----------
Total 5,703,082 5,553,448 26,931,431 26,764,185 5,267,379 4,431,993
============= =========== ============= ============ ============= ===========
27
Company
--------------------------------------------------------------------------------------
(Not reviewed by independent accountants)
-------------------------------------------------------
No. of consumers MWh R$
-------------------------- --------------------------- --------------------------
Nine-month period ended Nine-month period ended Nine-month period ended
September 30, September 30, September 30,
-------------------------- --------------------------- --------------------------
2003 2002 2003 2002 2003 2002
------------- ----------- ------------- ------------ ------------- -----------
Residential 4,697,553 4,586,863 4,896,586 4,710,103 1,704,185 1,275,029
Industrial 68,651 67,666 15,607,411 15,850,605 2,038,415 1,571,546
Commercial 520,389 512,666 2,515,268 2,415,082 748,629 568,137
Rural 361,561 332,427 1,298,083 1,230,838 238,093 179,967
Public authorities 44,441 43,031 372,155 336,852 104,413 75,747
Public lighting 2,163 2,661 747,015 657,449 132,000 94,568
Public services 6,992 6,770 724,549 707,623 124,220 93,491
Own consumption 1,321 1,358 40,436 37,032 - -
Unbilled, net - - - - 83,739 54,868
------------- ----------- ------------- ------------ ------------- -----------
5,703,071 5,553,442 26,201,503 25,945,584 5,173,694 3,913,353
Supply to other concessionaires 5 4 207,690 244,117 15,119 15,168
MAE transactions - - - - 34,793 473,964
------------- ----------- ------------- ------------ ------------- -----------
Total 5,703,076 5,553,446 26,409,193 26,189,701 5,223,606 4,402,485
============= =========== ============= ============ ============= ===========
22) OTHER OPERATING REVENUES
Consolidated Company
-------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
Use of basic transmission network 191,444 134,461 191,444 134,461
Gas sales 194,173 102,879 - -
Telecom and cable TV services 27,502 7,734 - -
Fuel usage quota 6,505 27,216 6,505 27,216
Regulated services 5,864 5,395 5,864 5,395
Other services rendered 18,744 11,938 18,414 11,938
Rent and leasing 17,383 13,258 17,383 13,258
Other 1,134 1,429 1,134 1,429
------------ ------------ ------------ ------------
462,749 304,310 240,744 193,697
============ ============ ============ ============
23) DEDUCTIONS FROM OPERATING REVENUES
Consolidated Company
-------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
State VAT - ICMS on sales to final consumers 1,103,458 839,491 1,063,579 833,385
COFINS - Tax on revenue 168,984 148,441 162,302 144,176
Global reserve for reversion quota - RGR 113,601 109,741 112,921 109,284
PASEP - Tax on revenue 92,215 41,912 88,884 40,988
Emergency capacity charge 194,463 44,602 191,716 44,299
Other 1,245 358 280 276
------------ ------------ ------------ ------------
1,673,966 1,184,545 1,619,682 1,172,408
============ ============ ============ ============
CEMIG collected, in the first half of 2003, retroactive amounts related to the
Emergency Capacity Charge for the period from July 2, 2002 to October 8, 2002,
in the amount of R$46,468, due to a class action injunction which did not
allow the amounts to be collected in the prior year.
CEMIG pays the State VAT the special rate adjustment according to collection
of the amounts in power bills.
28
24) ELECTRICITY PURCHASED FOR RESALE
Consolidated and Company
---------------------------------
Nine-month period ended
September 30,
---------------------------------
2003 2002
---------------- ---------------
Itaipu Binacional 865,850 727,705
Energy traded on spot market - MAE 37,121 564,538
Initial contracts 112,504 110,639
Special rate adjustment - transfer to generators - 45,330
Other 21,194 6,829
---------------- ---------------
1,036,669 1,455,041
================ ===============
The tariff of the electricity acquired from ITAIPU is denominated in US
dollars, defined by ANEEL.
25) OPERATING PROVISIONS
Consolidated Company
-------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
Allowance for doubtful accounts 66,168 4,717 64,465 4,717
Provision for losses on realization of the Special rate 32,166 - 32,166 -
adjustment
Labor claims 17,405 9,661 17,405 9,661
Civil lawsuits 13,604 10,338 13,604 10,338
Other 4,569 3,316 4,569 3,316
---------- --------- ---------- -----------
133,912 28,032 132,209 28,032
========== ========= ========== ===========
26) ENERGY DEVELOPMENT ACCOUNT (CDE)
The Energy development account (CDE) was created by Law No. 10,438/02 to
foster energy development in the states and to promote competition regarding
energy produced through wind farms, small hydroelectric power plants, biomass,
natural gas and coal. The amounts to be paid by CEMIG were defined by ANEEL
Resolution No. 42, of January 31, 2003.
27) OTHER EXPENSES
Consolidated Company
-------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
Fuel usage quota 6,397 27,994 6,397 27,994
Rentals and leasing 12,857 11,340 11,369 11,082
Grants and donations 9,856 10,467 9,856 10,467
Advertising 5,765 15,257 5,462 15,230
ANEEL inspection fee 10,565 8,640 10,439 8,529
Own consumption - Electric energy 9,988 8,486 8,594 7,493
MAE contribution 2,917 5,696 2,917 5,696
Energy efficiency expenses 9,910 7,197 9,668 7,003
Other taxes (real estate, vehicle, etc) 10,611 3,321 8,895 3,284
Other expenses, net 29,659 20,067 22,875 14,969
------------ ------------ ------------ ------------
108,525 118,465 96,472 111,747
============ ============ ============ ============
The fuel costs incurred for the purpose of electricity generation are
reimbursed by Eletrobras and are recorded as other operating revenues.
29
28) FINANCIAL INCOME (EXPENSES)
Consolidated Company
-------------------------- -------------------------
Nine-month period ended Nine-month period ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
Financial income:
Investment income earned 65,572 196,829 53,401 188,695
Arrears interest on past-due electricity bills 40,974 29,479 40,974 29,479
Interest and monetary restatement on receivable from State
Government 264,430 295,343 264,430 295,343
Allowance for losses related to monetary restatement on
receivable from State Government (145,245) (115,657) (145,245) (115,657)
Monetary restatement on special rate adjustment 247,254 199,190 247,254 199,190
Monetary restatement of CVA 80,352 7,231 80,352 7,231
Monetary restatement - Distributors - MAE transactions 70,185 70,654 70,185 70,654
Foreign exchange gains 339,292 81,914 320,967 81,912
Taxes on financial income (PASEP and COFINS) (53,221) (30,208) (53,293) (30,064)
Gains on derivative instruments 8,289 - 8,289 -
Other 7,626 24,731 6,127 24,561
------------ ------------- ------------ ------------
925,508 759,506 893,441 751,344
Financial expenses:
Interest on loans and financing (244,464) (184,117) (235,952) (171,743)
Monetary restatement - Electricity supply (51,217) (54,747) (51,217) (54,747)
Monetary restatement of CVA (6,262) (4,890) (6,262) (4,890)
Foreign exchange losses (23,566) (969,505) (23,566) (969,421)
Monetary restatement on loans and financing (43,456) (70,060) (43,451) (25,605)
Financial transaction tax ("CPMF") (26,808) (18,842) (25,308) (17,801)
Reversal (provision) for valuation of marketable securities 53,498 (70,579) 53,498 (70,579)
Interest on capital - (120,000) - (120,000)
Losses on derivative instruments (34,704) - (34,704) -
Other (47,828) (23,612) (45,842) (22,948)
------------ ------------- ------------ ------------
(424,807) (1,516,352) (412,804) (1,457,734)
------------ ------------- ------------ ------------
500,701 (756,846) 480,637 (706,390)
============ ============= ============ ============
Financial charges and monetary/exchange variations on funds borrowed to
finance construction in progress from January 2003 to September 2003, in the
amounts of R$58,701 and R$36,261, respectively, were transferred to property,
plant and equipment, and investments (R$41,626 of financial charges and
R$69,621 of monetary/exchange variations from January to September 2002).
30
29) PRINCIPAL RELATED-PARTY TRANSACTIONS
The main consolidated balances and transactions with related parties are as
follows:
September 30, 2003 June 30, 2003
--------------------------- ----------------------------
State State
Government FORLUZ Government FORLUZ
--------------- ---------- -------------- -----------
ASSETS
Current assets
Accounts receivable 14,854 - 33,464 -
Recoverable taxes
State VAT (ICMS) 37,178 - 28,061 -
Other
Advances for welfare benefits - 6,361 - 14,916
Other 315 - 225 -
Noncurrent assets
Receivable from State Government 874,145 - 836,971 -
Recoverable taxes
State VAT ICMS 98,083 - 99,503 -
State VAT - ICMS - Under discussion with State
Government 18,843 - 18,843 -
Accounts receivable 62,035 - 49,166 -
LIABILITIES
Current liabilities
Taxes payable-
State VAT - ICMS 164,463 - 157,179 -
Dividends and interest on capital 50,418 - 50,418 -
Employee post-retirement benefits - 183,681 - 244,257
Other
Transfer of contributions - 7,579 - 26,161
Long-term liabilities
Debentures 27,319 - 27,010 -
Employee post-retirement benefits - 1,524,838 - 1,533,142
Nine-month period ended Nine-month period ended
September 30, 2003 September 30, 2002
--------------------------- ----------------------------
State State
Government FORLUZ Government FORLUZ
--------------- ---------- -------------- -----------
INCOME STATEMENT
Electricity sales to final customers 23,752 - 17,071 -
Other operating revenues 360 - - -
Deductions from operating revenues - State VAT - ICMS (1,103,458) - (839,491) -
Employee post-retirement benefits - (35,630) - (162,748)
Personnel expenses - (24,588) - (21,695)
Financial income-
Interest and monetary restatement on receivable from
State Government 264,430 - 295,343 -
Provision for losses on accounts receivable from State
Government (145,245) - (115,657) -
Financial expenses-
Monetary restatement of debentures (1,813) - - -
Nonoperating expenses-
Provision for extraordinary losses on accounts
receivable from State Government - - (1,045,325) -
FORLUZ - management expenses (4,075) - (6,545) -
R$76,889 of accounts receivable from the State Government as of September 30,
2003, recorded in current and noncurrent assets, includes past-due accounts
receivable from COPASA. Management does not expect losses on the realization
of this asset.
31
30) FINANCIAL INSTRUMENTS
The financial instruments used by CEMIG are cash and cash equivalents,
accounts receivable, receivable from State Government, marketable securities
and loans, financing, and debentures, and gains and losses on transactions are
fully recorded on an accrual basis.
These instruments are managed through monitoring policies and operational
strategies focused on liquidity, profitability and safety. The Company
operates with banks which meet financial strength and trustworthiness
requirements, according to pre-defined management criteria. The Company's
control policy includes continually comparing rates with market levels.
As of September 30, 2003, CEMIG and its subsidiaries have short term
investments with interest rate swaps, in the amount of R$24,916 and R$32,633,
respectively. These short term investments have repurchase clauses and
interest rates based on the CDI (Interbank Certificate Rate). The Company and
its subsidiaries have the right to call for early redemption of these
securities without penalty or loss.
a) Derivatives
The Company has derivative financial instruments in order to protect its
operations from exchange rate risk. The derivative financial instruments are
not used for speculative purposes. CEMIG's subsidiaries have no derivative
financial instruments as of September 30, 2003 and June 30, 2003.
As of September 30, 2003, the Company has derivative financial instruments
(swaps) with financial institutions, in connection with potential exchange
losses resulting from the devaluation of the Brazilian real compared to the
U.S. dollar, in an amount equivalent to US$121,928 thousand.
The principal amounts of the derivative financial instruments are not recorded
on the balance sheet. The net realized and unrealized accumulated losses from
these operations from January 2003 to September 2003, in the amount of R$4,139
and R$22,276, respectively, were recorded in financial expenses.
Unrealized gains (losses) from derivative financial instruments are recorded
on an accrual basis, which may result in significant differences when compared
to the estimated market value of such instruments, due to the fact that the
market value represents the present value of future gains and losses on these
operations.
The table below presents the Company's derivative financial instruments,
unrealized gains (losses) recorded, and estimated market value as of September
30, 2003:
Unrealized gains (Losses)
-------------------------------
Estimated
Principal Book value Market value
value -------------- ---------------
CEMIG's CEMIG's contracted September 30,
rights obligations Maturity US$ thousand 2003
---------------------------- --------------------------- --------------- -------------- -------------------------------
US$ R$
Plus interest rate Indexed to CDI variation From 11/2003
(5.64% to 14.20% per year) (100% CDI) to 12/2003 33,543 (15,023) (14,876)
R$
Indexed to pre-fixed
US$ interest rates
(21.46% per year) 11/2003 14,585 (1,421) (2,195)
R$
US$ Indexed to CDI variation
(95% CDI) 12/2003 73,800 (5,832) (5,961)
-------------- --------------- --------------
121,928 (22,276) (23,032)
============== =============== ==============
32
b) Marketable Securities
The Company has Brazilian National Treasury Notes acquired from the State
Government, with final maturity on April 15, 2024, subject to restatement
based on the U.S. dollar exchange variation and interest on the restated face
value of 6.00% per year (from April 15, 2000 to maturity).
September 30, June 30,
2003 2003
------------- ----------
Face value 176,752 173,645
Market value 84,511 74,691
These securities are recorded at market value, determined based on a quotation
from ANDIMA (National Association of Open Market Institutions). This asset is
recorded under marketable securities in noncurrent assets.
31) CORPORATE REORGANIZATION
Currently, electricity generation, transmission and distribution operations
are vertically integrated into and directly operated by CEMIG. However,
pursuant to CEMIG's principal concession agreements and certain changes in the
regulatory framework of the Brazilian electricity sector, CEMIG should
restructure its operations, which would result in the unbundling of its
generation, transmission and distribution operations into separate
subsidiaries, each wholly owned by CEMIG. According to the concession
agreements, CEMIG was to have completed the reorganization process by December
31, 2000.
ANEEL granted the Company an extension to September 21, 2002 to complete the
unbundling process.
On March 2, 2001, the State Government, CEMIG's majority shareholder,
submitted to the Legislature, for its approval, a bill proposing the
restructuring of the Company into three companies. This bill has not yet been
adopted, and the reorganization process has not yet been completed because
such reorganization must first be approved by the State Legislature. The
Company has submitted an extension request to ANEEL, which has not yet been
answered.
On November 11, 2002, ANEEL fined the Company R$6,046, because it had not
concluded the unbundling. No accrual has been recorded for this claim, as the
Company believes it has a meritorious defense against the fine and any other
possible penalties that may be imposed regarding this matter.
33
32) STATEMENTS OF CASH FLOWS
The individual (Company) and consolidated statements of cash flows for the
nine-month periods ended September 30, 2003 and 2002 are presented to permit
additional analysis and are not required as part of the basic interim
financial statements.
Consolidated Company
---------------------------------- -------------------------------
Nine-month periods Nine-month periods
ended September 30, ended September 30,
---------------------------------- -------------------------------
2003 2002 2003 2002
--------------- --------------- ------------- --------------
CASH FLOWS FROM OPERATIONS:
Net income (loss) for the period 813,163 (1,150,905) 813,163 (1,150,905)
Items not affecting cash -
Depreciation and amortization 421,766 408,388 391,249 387,376
Special rate adjustment - (268,913) - (268,913)
Distributors - MAE transactions (21,318) (464,976) (21,318) (464,976)
Energy purchased on spot market - suppliers - 65,242 - 65,242
Disposals of property, plant and equipment, net 52,741 16,205 52,741 16,205
Equity in subsidiaries - - (27,949) 15,778
Interest and monetary variations, net (594,133) 282,742 (576,276) 234,027
Deferred income and social contribution taxes 97,739 (245,448) 97,722 (220,424)
Operating provisions 106,132 91,010 104,429 91,010
Provision for losses on accounts receivable from
State Government - 1,045,325 - 1,045,325
Employee post-retirement benefits 35,630 162,748 35,630 162,748
Other (769) (10,951) - -
--------------- --------------- ------------- --------------
910,951 (69,533) 869,391 (87,507)
--------------- --------------- ------------- --------------
(Increase) Decrease in assets -
Accounts receivable (247,533) (290,261) (265,380) (290,797)
Consumers - Special rate adjustment 197,101 183,203 197,101 183,203
Recoverable taxes (84,346) (39,215) (84,080) (28,884)
Other current assets 42,715 (74,791) 44,123 (56,572)
Electricity Rationing Plan - Bonus paid to
consumers in excess of surcharge - (87,565) - (87,565)
Reimbursement of bonus paid to consumers and
adoption costs 13,494 88,066 13,494 88,066
Prepaid expenses - CVA (51,600) (159,028) (51,600) (159,028)
Escrow deposits - (49,474) - (49,474)
Receivables from Federal Government - Revenue
losses from low-income consumers 11,027 - 11,027 -
Other noncurrent assets 3,116 (36,195) 2,839 (39,608)
--------------- --------------- ------------- --------------
(116,026) (465,260) (132,476) (440,659)
--------------- --------------- ------------- --------------
Increase (Decrease) in liabilities -
Suppliers (503,806) 702,449 (488,475) 703,511
Taxes payable 394,934 254,640 391,168 239,947
Payroll and related charges 15,401 16,193 15,073 15,655
Regulatory charges 44,368 17,140 44,092 17,398
Loans and financing (49,043) 324,274 (54,899) 314,387
Employee post-retirement benefits (164,591) (120,780) (164,591) (120,780)
Other 54,558 (16,747) 85,769 (19,330)
--------------- --------------- ------------- --------------
(208,179) 1,177,169 (171,863) 1,150,788
--------------- --------------- ------------- --------------
CASH PROVIDED BY OPERATING ACTIVITIES 586,746 642,376 565,052 622,622
--------------- --------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITY:
Proceeds from long-term financing 903,938 287,290 903,938 287,290
Payments of loans and financing (622,678) (287,949) (599,660) (275,035)
Advance billings of electric power - (42,596) - (42,596)
Advance for future capital increase - 11,526 - -
Dividends and interest on capital 109 (176,571) (44) (176,374)
281,369 (208,300) 304,234 (206,715)
--------------- --------------- ------------- --------------
TOTAL CASH PROVIDED 868,115 434,076 869,286 415,907
--------------- --------------- ------------- --------------
34
Consolidated Company
---------------------------------- -------------------------------
Nine-month periods Nine-month periods
ended September 30, ended September 30,
---------------------------------- -------------------------------
2003 2002 2003 2002
--------------- --------------- ------------- --------------
CASH USED IN INVESTING ACTIVITIES
Additions to investments (167,489) (293,392) (225,680) (372,567)
Additions to property, plant and equipment (592,478) (528,509) (543,860) (450,565)
Special liabilities 61,932 113,141 61,932 113,141
Increase in deferred charges (235) (15,187) - -
--------------- --------------- ------------- --------------
(698,270) (723,947) (707,608) (709,991)
--------------- --------------- ------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 169,845 (289,871) 161,678 (294,084)
=============== =============== ============= ==============
CHANGES IN CASH AND CASH EQUIVALENTS
At beginning of period 122,975 705,844 50,303 642,492
At end of period 292,820 415,973 211,981 348,408
--------------- --------------- ------------- --------------
169,845 (289,871) 161,678 (294,084)
=============== =============== ============= ==============
***********************
35
Item 2
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS -- CEMIG
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF CONSOLIDATED OPERATIONS:
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE-MONTH
PERIOD ENDED SEPTEMBER 30, 2002
(Amounts expressed in thousands of Brazilian reais, unless otherwise indicated)
Net Income (loss)
The Company and its subsidiaries (" the CEMIG Group") had net income of
R$813,163 in the nine-month period ended September 30, 2003 compared to a net
loss of R$1,150,905 in the nine-month period ended September 30, 2002.
In the nine-month period ended September 30, 2003, consolidated income was
positively affected by an increase in electricity sales and financial income
from appreciation of the Brazilian real against the U.S. dollar. In the same
period of 2002, the result was negatively impacted by the provision for losses
on receivables from the Minas Gerais State Government (the "State Government")
and financial expenses from devaluation of the Brazilian real against the U.S.
dollar.
Electricity sales
Electricity gross sales were R$5,267,379 in the nine-month period ended
September 30, 2003 compared to R$4,431,993 in the nine-month period ended
September 30, 2002, an increase of 18.85%. This result was primarily due to:
o an average rate increase of 10.51% starting on April 8, 2002 (full effect
in 2003);
o an average rate increase of 31.53% starting on April 8, 2003;
o an increase in the Emergency Capacity Charge collected in the nine-month
period ended September 30, 2003; and
o a 0.61% increase in volume of electricity sold (excluding own
consumption).
Electricity sales to final customers
------------------------------------
Electricity gross sales to final customers were R$5,217,275 in the nine-month
period ended September 30, 2003 compared to R$3,942,861 in the nine-month
period ended September 30, 2002, representing an increase of 32.32%. This
increase resulted substantially from the average rate increases of 10.51% and
31.53% in April 2002 and 2003, respectively, and a 0.76% rise in electricity
sales volume (excluding own consumption). Sales to the most representative
markets, residential and commercial, increased 3.96% and 4.15% respectively,
and sales to the industrial market decreased 1.80%.
The increase in electricity gross sales to final customers also resulted from
the Emergency Capacity Charge included in power bills in the amount of
R$194,463 in the nine-month period ended September 30, 2003 compared to
R$44,602 in the nine-month period ended September 30, 2002 (the collection of
this charge started in March 2002). The significant change between these
periods is primarily a result of the retroactive collection, in 2003, of part
of the Emergency Capacity Charge related to the period from July 2, 2002 to
October 8, 2002, in the amount of R$46,468, due to an injunction which did not
allow its collection at that time.
1
Volume of electricity sold to final consumers - GWh
[BAR CHART SHOWING THE VOLUME OF ELECTRICITY SOLD TO FINAL CONSUMERS FOR
THE FIRST, SECOND AND THIRD QUARTERS OF 2002 AND THE FIRST, SECOND
AND THIRD QUARTERS OF 2003 OMITTED]
Electricity supply to other concessionaries (including the MAE transactions)
----------------------------------------------------------------------------
Revenues from electricity supply to other concessionaires were R$50,104 in the
nine-month period ended September 30, 2003 compared to R$489,132 in the
nine-month period ended September 30, 2002, a decrease of 89.76%. This
decrease was primarily a result of higher revenues from energy traded in the
spot market ("MAE") in the prior period, arising from CEMIG's reimbursement
right and the difference between the amounts paid on the MAE transactions
during the period when the Electricity Rationing Plan was in effect and the
amount of R$49.26/MWh.
Special rate adjustment revenue
-------------------------------
In accordance with the General Agreement of the Electricity Sector, CEMIG
recorded in the nine-month period ended September 30, 2002 revenue from the
special rate adjustment in the amount of R$268,913 for billing losses and a
portion of expenses for energy traded on the MAE, during the Electricity
Rationing Plan. The amounts recorded as special rate adjustment revenue are
being collected by CEMIG through an additional rate increase in effect for a
maximum period of 82 months, since January 2002.
Operating expenses
The operating expenses were R$3,240,112 in the nine-month period ended
September 30, 2003 compared to R$3,406,871 in the nine-month period ended
September 30, 2002, a decrease of 4.90%, due primarily to a decrease in
electricity purchased for resale and employee post-retirement benefits against
an increase in personnel expenses, Gas purchased for resale, Operating
provisions and the new contribution to the Energy development account,
beginning in 2003. The main variations in expenses are described below:
Personnel
---------
Personnel expenses were R$466,742 in the nine-month period ended September 30,
2003 compared to R$398,328 in the nine-month period ended September 30, 2002,
an increase of 17.18%, due primarily to a salary increase of 11.45% in
November 2002, and a reduction in the percentage of personnel expenses
transferred to construction in progress.
2
Electricity purchased for resale
--------------------------------
Electricity purchased for resale was R$1,036,669 in the nine-month period
ended September 30, 2003 compared to R$1,455,041 in the nine-month period
ended September 30, 2002, representing a decrease of 28.75%. This variation is
a result of the decrease in the MAE transaction expenses, R$37,121 in the
nine-month period ended September 30, 2003 compared to R$564,538 in the
nine-month period ended September 30, 2002. Higher MAE expenses in the
nine-month period ended September 30, 2002 were due to the higher rates in
effect during the Electricity Rationing Plan. Due to the revisal of the MAE
methodology to calculate the costs and MAE's delay to disclose such
information, the amounts were recorded in 2002. On the other hand, there was
an increase in expenses for energy purchased from Itaipu, R$865,850 in the
nine-month period ended September 30, 2003 compared to R$727,705 in the
nine-month period ended September 30, 2002.
Depreciation and amortization
-----------------------------
Depreciation and amortization expenses did not vary significantly compared to
the prior periods. Expenses were R$421,766 in the nine-month period ended
September 30, 2003 and R$408,388 in the nine-month period ended September 30,
2002, an increase resulting primarily from the operation of a new CEMIG
distribution network and lines and permanent assets of Infovias, a subsidiary
of CEMIG.
Outside services
----------------
Outside services were R$221,944 in the nine-month period ended September 30,
2003 compared to R$179,556 in the nine-month period ended September 30, 2002,
representing an increase of 23.61%, due primarily to the adjustment to service
contract prices, mainly related to maintenance of facilities and electric
equipment.
Employee post-retirement benefits
---------------------------------
Employee post-retirement benefit expenses were R$35,630 in the nine-month
period ended September 30, 2003 compared to R$162,748 in the nine-month period
ended September 30, 2002, representing a reduction of 78.11%. This decrease
was basically due to the estimate, for 2003, of a lower increase in projected
benefit obligations compared to a higher profitability expected for plan
assets.
Operating provisions
--------------------
Operating provisions were R$133,912 in the nine-month period ended September
30, 2003 compared to R$28,032 in the nine-month period ended September 30,
2002, representing an increase of 377.71%. This increase is due to the
additional provision for losses on realization of the special rate adjustment,
in the amount of R$32,166, recorded in the nine-month period ended September
30, 2003 and the allowance for doubtful accounts of R$66,168 recorded in the
nine-month period ended September 30, 2003 compared to a reversion of R$4,717
recorded in the nine-month period ended September 30, 2002. The significant
increase in the allowances is due to the rate increase in April 2003 (impact
on the allowance recorded in the third quarter of 2003) and the increase in
overdue amounts in such periods.
3
Fuel usage quota - CCC
----------------------
Fuel usage quota expenses were R$219,900 in the nine-month period ended
September 30, 2003 compared to R$252,373 in the nine-month period ended
September 30, 2002, representing a reduction of 12.87%. Fuel usage quota
refers to operating costs of thermoelectric power plants in the Brazilian
energy system prorated among electric concessionaires according to an ANEEL
resolution.
Gas purchased for resale
------------------------
Gas purchased for resale expenses were R$126,148 in the nine-month period
ended September 30, 2003 compared to R$75,568 in the nine-month period ended
September 30, 2002, an increase of 66.93%. These expenses refer to gas
purchased by GASMIG. The variation in these expenses is due to a gas price
increase partially offset by a 0.73% reduction in the volume of acquired gas,
319,056 thousand m(3) in the nine-month period ended September 30, 2003
compared to 321,415 thousand m(3) in the nine-month period ended September 30,
2002 as a result of lower purchase volumes from thermoelectric power plants
and industrial consumers, partially offset by a higher sales volume to
automotive consumers.
Energy development account - CDE
--------------------------------
The Energy development account - CDE was created to foster energy development
in the states and to promote competition regarding energy produced from
alternative sources. These costs impacted the CEMIG Group's 2003 result, in
the amount of R$77,763, and were defined by ANEEL Resolution No. 42 of January
31, 2003.
Financial income (expenses)
The main factors that impacted the financial items are as follows:
o Investment income was R$65,572 in the nine-month period ended
September 30, 2003 compared to R$196,829 in the nine-month period
ended September 30, 2002. The negative variation is a result of the
lower investment volume in 2003.
o Net exchange gains were R$315,726 in the nine-month period ended
September 30, 2003, compared to net exchange losses of R$887,591 in
the nine-month period ended September 30, 2002. These gains are
principally related to loans and financing denominated in foreign
currencies. In the nine-month period ended September 30, 2003, the
Brazilian real appreciated 17.26% over the U.S. dollar, compared to
a 67.85% devaluation in the same period of 2002.
o Net revenues from CVA monetary restatement amounted to R$74,090 in
the nine-month period ended September 30, 2003, compared to R$2,341
in the nine-month period ended September 30, 2002. This variation is
due to a higher CVA average balance in 2003, that is restated by
SELIC.
o Interest and monetary restatement expenses on loans and financing
amounted to R$244,464 in the nine-month period ended September 30,
2003, compared to R$184,117 in the same period of last year. This
increase is primarily due to a reduction in the volume of financial
costs transferred to construction in progress.
o Reversal of the provision for valuation of National Treasury Notes,
which are denominated in U.S. dollars, was R$53,498 in the
nine-month period ended September 30, 2003 compared to a provision
of R$70,579 in the nine-month period ended September 30, 2002.
o Interest on capital declared in the nine-month period ended
September 30, 2002 in the amount of R$120,000.
Nonoperating expenses, net
Nonoperating expenses were R$24,470 in the nine-month period ended September
30, 2003 compared to R$1,064,866 in the nine-month period ended September 30,
2002. This variation is due to a provision for loss recorded in 2002, in the
amount of R$1,045,325, related to the Second Amendment to the Credit
Assignment Contract for CRC Account (Recoverable Rate Deficit Account) signed
with the State Government.
4
Income and social contribution taxes
The CEMIG Group recorded income and social contribution tax expenses of
R$480,128 in the nine-month period ended September 30, 2003, representing
37.15% of pre-tax income.
In the nine-month period ended September 30, 2002, income tax benefits were
R$126,809 in relation to a pre-tax loss of R$1,407,912, a percentage of 9.01%.
This result is primarily due to the provision for loss related to the Credit
Assignment Contract for CRC Account in the amount of R$1,045,325 recorded in
2002, nondeductible for income and social contribution tax purposes.
5
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
OTHER RELEVANT INFORMATION
Information not reviewed by independent accountants
CORPORATE GOVERNANCE
CEMIG has strived to implement the best corporate governance practices in
order to optimize its performance and offer more protection, through
improvements in information disclosed to the markets and to all interested
parties, including investors, employees and creditors. These practices mainly
involve appropriate disclosure, equitable treatment of shareholders and
accountability for the Company's actions.
Highlighted below are practices that CEMIG has already adopted:
o Notices of general shareholders' meetings set forth in detail the
meeting's agenda, including relevant items suggested by
shareholders, and such meetings are held at convenient dates and
times.
o The share register, which sets forth the number of shares owned by
each shareholder, can be obtained at any time for a service charge,
in accordance with Article 100 of Law 6,404 of December 15, 1976.
o Documentation necessary to evidence the ownership of shares of CEMIG
is accurately maintained, in order to permit the participation and
vote of its shareholders or their representatives at shareholders'
meetings.
o The Board of Directors, which has a unified term, has 14 technically
qualified members, 9 of whom have finance, economic, law and
accounting experience. The Board of Directors seeks to advise
CEMIG's executive officers on ways to maximize return on assets in
order to acquire value for the Company.
o In accordance with Law 10,303 of October 31, 2001, and the majority
shareholder's decision in accordance with the best corporate
governance practices, minority shareholders of preferred shares have
elected a member of the Board of Directors.
o Preferred shares have priority in the redemption of capital and
participate equally with the common shares in net income. At the
Annual Shareholders' meeting of April 30, 2002, the Company's Bylaws
were changed and the preferred shares became entitled to a minimum
annual dividend equal to the greater of 10% of the preferred capital
according to the Brazilian corporate law or 3% of the book value of
the preferred shares. The minimum amount of dividends cannot be less
than 25% of the adjusted net income for the year, in accordance with
Brazilian corporate law.
o On a quarterly basis, the Company discloses to its Fiscal Council
reports prepared together with financial statements, which analyze
and discusse such financial statements, including related internal
and external risk factors.
o In order to avoid conflicts of interest, the Board of Directors does
not authorize its public accountants to provide consulting or other
services to CEMIG.
o CEMIG provides to the members of its Fiscal Council all information
that may be needed to analyze the Company's main issues.
o The Company adopts, in addition to those established by Brazilian
corporate law and rules established by the CVM (Brazilian Securities
Commission), generally accepted accounting
6
principles of the United States, or US GAAP, in order to prepare
financial statements to be filed with the United States Securities
and Exchange Commission - SEC.
o The memorandum of suggestions on accounting and internal control
procedures provided to CEMIG by its public accountants is submitted
to the Board of Directors and to the Fiscal Council in order to
evaluate the proposals and adoption of applicable measures.
o Transactions with related parties are disclosed in CEMIG's financial
statements.
o CEMIG's investor relations policy seeks to provide access to a wide
range of investors through:
o CEMIG's Internet home page, which is accessible to all
investors and shareholders, and contains material
information related to CEMIG and its operations.
o Broad dissemination of the disclosure of CEMIG's results.
o Live conferences accessible to everyone through CEMIG's
Internet home page.
o CEMIG has adopted Level 1 of the corporate governance standards
established by BOVESPA (Sao Paulo Stock Exchange).
o CEMIG has listed depositary receipts on foreign stock exchanges, in
New York and Madrid.
o CEMIG regularly pays dividends to its shareholders in accordance
with the provisions of its By-laws.
In addition, CEMIG is considering the adoption of additional corporate
governance practices that will be disclosed on a timely basis.
7
FINANCIAL INDICATORS
SHARE VALUE
(Expressed in Brazilian reais per thousand shares)
----------------------- --------------- ------------------------- ----------------------- -------------------------
Item Unit September 30, 2003 June 30,2003 September 30, 2002
----------------------- --------------- ------------------------- ----------------------- -------------------------
Book value 40.07 38.35 34.75
----------------------- --------------- ------------------------- ----------------------- -------------------------
Market value Common 23.07 21.10 22.02
Preferred 34.35 26.35 23.01
----------------------- --------------- ------------------------- ----------------------- -------------------------
LIQUIDITY (excluding special liabilities)
--------------------------- ---------- ------------------------ ------------------------- -------------------------
Item Unit September 30, 2003 June 30,2003 September 30, 2002
--------------------------- ---------- ------------------------ ------------------------- -------------------------
Current ratio Ratio 0.73 0.67 0.62
--------------------------- ---------- ------------------------ ------------------------- -------------------------
Overall liquidity Ratio 0.73 0.70 0.68
--------------------------- ---------- ------------------------ ------------------------- -------------------------
DEBT LEVEL (excluding special liabilities)
-------------------------------- -------- ------------------------- ----------------------- -------------------------
Item Unit September 30, 2003 June 30,2003 September 30, 2002
-------------------------------- -------- ------------------------- ----------------------- -------------------------
Total assets % 55.60 57.10 59.98
-------------------------------- -------- ------------------------- ----------------------- -------------------------
Shareholders' equity % 125.78 133.09 150.82
-------------------------------- -------- ------------------------- ----------------------- -------------------------
Permanent assets % 93.30 95.04 101.51
-------------------------------- -------- ------------------------- ----------------------- -------------------------
PROFITABILITY
--------------------------------------- -------- ------------------------- ------------------- -------------------------
Item Unit September 30, 2003 June 30,2003 September 30, 2002
--------------------------------------- -------- ------------------------- ------------------- -------------------------
Shareholders' equity % 14.31 9.43 (20.44)
--------------------------------------- -------- ------------------------- ------------------- -------------------------
Return on property, plant and %
equipment 10.22 6.74 (14.68)
--------------------------------------- -------- ------------------------- ------------------- -------------------------
Operating margin % 20.12 16.91 11.40
--------------------------------------- -------- ------------------------- ------------------- -------------------------
Net margin % 16.31 16.58 (25.12)
--------------------------------------- -------- ------------------------- ------------------- -------------------------
OPERATING INDICES
INSTALLED CAPACITY
----------------------------------------- -------------------------------- --------------------------------
September 30,2003 September 30, 2002
----------------------------------------- -------------------------------- --------------------------------
Installed capacity (in MW) 5,771 5,675
----------------------------------------- -------------------------------- --------------------------------
EFFICIENCY
-------------------------------------- ----------- -------------------------------------------------------------
For the nine-month period ended
-------------------------------------- ----------- ------------------------------ ------------------------------
Item Unit September 30,2003 September 30, 2002
-------------------------------------- ----------- ------------------------------ ------------------------------
MWh (*) per employee MWh 2.295 3.332
-------------------------------------- ----------- ------------------------------ ------------------------------
Consumers per employee No. 502 484
-------------------------------------- ----------- ------------------------------ ------------------------------
(*) excludes energy transactions on the spot market
8
SERVICE QUALITY
-------------------------------------------------------- ---------- ---------------------------------------------
For the nine-month period ended
-------------------------------------------------------- ---------- ---------------------- ----------------------
Item Unit September 30, September 30,
2003 2002
-------------------------------------------------------- ---------- ---------------------- ----------------------
Average time needed to restore electricity Hours 4.42 4.01
-------------------------------------------------------- ---------- ---------------------- ----------------------
Electricity outage time - average per consumer Hours 7.28 8.39
-------------------------------------------------------- ---------- ---------------------- ----------------------
Outages experienced - average per consumer No. 4.37 5.00
-------------------------------------------------------- ---------- ---------------------- ----------------------
AVERAGE RATE
(Expressed in Brazilian reais per MWh)
------------------------------------ -------------------------------------------------------------------------
Including ICMS (VAT)
------------------------------------ -------------------------------------------------------------------------
Description September 30, 2003 September 30, 2002
------------------------------------ ------------------------------------- -----------------------------------
Industrial 129.08 99.15
------------------------------------ ------------------------------------- -----------------------------------
Residential 348.04 270.70
------------------------------------ ------------------------------------- -----------------------------------
Commercial 297.63 235.25
------------------------------------ ------------------------------------- -----------------------------------
Rural 183.42 146.22
------------------------------------ ------------------------------------- -----------------------------------
Others 195.60 155.00
------------------------------------ ------------------------------------- -----------------------------------
Final Consumers 189.95 148.93
------------------------------------ ------------------------------------- -----------------------------------
SHAREHOLDERS OWNING MORE THAN 5% OF VOTING CAPITAL
AS OF SEPTEMBER 30, 2003
-----------------------------------------------------------------------------------------------------------------
ACIONISTA COMMON SHARES % PREFERRED SHARES % TOTAL SHARES %
-----------------------------------------------------------------------------------------------------------------
Minas Gerais
State Government 36,116,291,643 50.96 102 - 36,116,291,745 22.27
Other State's entities 3,365,756 - 2,771,169,007 3.03 2,774,534,763 1.70
------------------- -------- --------------------- -------- -------------------- -------
State's Total 36,119,657,399 50.96 2,771,169,007 3.03 38,890,826,508 23.97
Southern Electric
Brasil Part. Ltda. 23,362,956,173 32.96 - - 23,362,956,173 14.41
-----------------------------------------------------------------------------------------------------------------
SOUTHERN ELECTRIC BRASIL PARTICIPACOES LTDA. - CAPITAL COMPOSITION
AS OF SEPTEMBER 30, 2003
----------------------------------------------------------------------------------------
Item Name Number of quotas %
----------------------------------------------------------------------------------------
1 Cayman Energy Traders 321,480,876 91.75
----------------------------------------------------------------------------------------
2 524 Participacoes S/A 28,913,419 8.25
----------------------------------------------------------------------------------------
1 - Foreign Company
2 - Publicly-held Company. Fundo Opportunity Alfa FIA has 99.99% of its capital.
9
CONTROLLING SHAREHOLDER, BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND FISCAL
COUNCIL MEMBERS INTEREST AS OF SEPTEMBER 30, 2003 AND 2002
------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES
------------------------------------------------------------------------------------------------------------------------
September 30, 2003 September 30, 2002
-------------------------------------------------------------------
Common Preferred Common Preferred
-------------------------------------------------------------------
CONTROLLING SHAREHOLDER 36,119,657,399 2,771,169,109 36,119,456,294 3,030,365,843
BOARD OF DIRECTORS
Wilson Nelio Brumer - 1 - -
Djalma Bastos de Morais - 13,400 - 13,140
Francelino Pereira dos Santos - 1 - -
Antonio Adriano Silva - 1 - 1
Flavio Jose Barbosa de Alencastro - 1 - -
Oderval Esteves Duarte Filho 5,099 - 5,099 -
Marcelo Pedreira de Oliveira 5,099 - 5,099 -
Joao Bosco Braga Garcia 5,099 - - -
Sergio Lustosa Botelho Martins 5,099 - - -
Aecio Ferreira da Cunha 5,866 1,461 - -
Francisco Roberto Andre Gros - 1 - -
Mario Lucio Lobato 5,000 - - -
Maria Estela Kubistscheck Lopes - 1 - -
Alexandre Heringer Lisboa - 1 - -
Luiz Antonio Athayde Vasconcelos - 290 - -
Marco Antonio Rodrigues da Cunha - 1 - -
Francisco Sales Dias Horta - 1 - -
Guilherme Horta Goncalves Junior - 1 - -
Geraldo Dannemann 1 1 - -
Luiz Felippe Leal da Fonseca Junior 1,000 - - -
Carlos Suplicy de Figueiredo Forbes 4,079 - - -
Marc Leal Claassen 5,099 - - -
Arnaldo Jose Vollet - 1 - -
Fernando Lage de Melo - 1 - -
Eduardo Lery Vieira - 1 - -
Andre Luis Garbuglio 1,000 - - -
Fernando Henrique Schuffner Neto - 101,218 - -
Franklin Moreira Goncalves - 1 - -
Geraldo de Oliveira Faria - - - 5,866
Alexandre de Paula Dupeyrat Martins - - 10,198 1
Claudio Jose Dias Sales - - 1 -
Marco Antonio Rebelo Romanelli - - 1 -
Sergio Roberto Belisario - - - 1
David Travesso Neto - - 1 -
Ataide Vilela - - - 1
10
------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES
------------------------------------------------------------------------------------------------------------------------
September 30, 2003 September 30, 2002
-------------------------------------------------------------------
Common Preferred Common Preferred
-------------------------------------------------------------------
EXECUTIVE OFFICERS
Djalma Bastos de Morais - - - -
Francisco Sales Dias Horta - - - -
Celso Ferreira - - - -
Flavio Decat de Moura - - - -
Elmar de Oliveira Santana - - - -
Jose Maria de Macedo - 112,962 - -
Heleni de Mello Fonseca - - - -
Guy Maria Villela Paschoal - - 2,854 -
Aloisio Marcos Vasconcelos Novais - - - -
Stalin Amorim Duarte - - - 106,544
Cristiano Correa de Barros - - 1 1,325,790
FISCAL COUNCIL
Luiz Guarita Neto - - - -
Aristoteles Luiz Menezes Vasconcellos Drummond - - - -
Luiz Otavio Nunes West - - - -
Bruno Constantino Alexandre dos Santos - - - -
Thales de Souza Ramos Filho - - - -
Beatriz Oliveira Fortunato - 10 - -
Augusto Cezar Calazans Lopes - - - -
Ronald Gastao Andrade Reis - - - -
Marcos Eolo de Lamounier Bicalho - - - 12,644
Aliomar Silva Lima - - - -
------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES AVAILABLE ON MARKET
(EXCLUDES SHARES OF THE STATE GOVERNMENT)
----------------------------------------------------------------------------------------------------------------------
Common % Preferred % Total %
----------------------------------------------------------------------------------------------------------------------
09/30/2003 34,757,876,280 49.04 91,210,522,597 99.92 125,968,398,877 77.69
----------------------------------------------------------------------------------------------------------------------
09/30/2002 34,754,711,629 49.04 88,180,156,856 97.00 122,934,868,485 76.00
----------------------------------------------------------------------------------------------------------------------
11
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPANHIA ENERGETICA DE MINAS
GERAIS - CEMIG
By: /s/ Flavio Decat de Moura
-----------------------------------
Name: Flavio Decat de Moura
Title: Chief Financial Officer
and Investor Relations Officer
Date: November 17, 2003
1